My retired mothers interest only mortgage expired - please help! :(

holly_hobby

"Small" print is actually a contractual term - if you breach it without consent, you're in doo doo on discovery.

You also won't get a mge on a 2nd property at 95%.

Lenders can, and do, refuse consent to let applications - especially if they feel its been used to facilitate a back door buy to let arrangement.

Hope this helps

Holly

TLOR

holly_hobby wrote: »

There can't possibly re 29k os on repayment (from an original 40k C&I mge), if there is only 18 mths left till the end of term (unless there has been significant arrears/roll up of arrears). So either the info re the amount OS on repayment and/or the remaining term is inaccurate - as the figs don't jell !



Prosecution of all connected parites for a fraudulent application.



No, that would be a breach of mge terms and conditions (with possible immediate requirement of repayment), if you didn't seek the lenders permission to let (referd to as Consent to Let).

Sorry to burst the bubble on those 2 !

Hope this helps

Holly x

Thanks Holly,

No bubble burst, I have been in the position of having to inform my lender that I plan to let my residential property on two occasions and it was not the slightest issue, the fact is circumstances change and banks are well aware of this and as explained above very few banks would want to force a repossession on these circumstances.

As for the other situation, it would only be fraud if it was pre-planned and I can not possibly ever imagine how this could every be proven in court, if you have any links of this occurring though I would be interested to read them?

I appreciate you are most likely a mortgage broker/adviser and are duty bound to provide advice that is by the book and I appreciate it very much. Many brokers as I am sure you are aware will offer entirely different advice!

TLOR

holly_hobby wrote: »

"Small" print is actually a contractual term - if you breach it without consent, you're in doo doo on discovery.

You also won't get a mge on a 2nd property at 95%.

Lenders can, and do, refuse consent to let applications - especially if they feel its been used to facilitate a back door buy to let arrangement.

Hope this helps

Holly

If it was to be my primary property it would be possible.

holly_hobby

95% borrowing on a 2nd property

Possibly , under a "let to buy" arrangement (ie where you are renting out your original home (which is self funding), and seeking a new mge on a property to be your new primary residence). Under a straight 2nd property, no you won't get 95% whether its your primary residence of not.

But this isn't going to be your primary residence - and you know it from outset - as you intend to let it to your parents post completion ... which means its a fraudulent application (deliberate attempt to decieve for finanical gain). Sorry.

CTL - as I say IF the lender believes you have pchd under a resi mge as a back door buy to let (although usually its the other way round), or for anyother reason, they can and do refuse CTL requests - which means that to let without the lenders tacit consent, puts you in breach of your mge T&Cs - to which they can demand immediate redemption.

Advising by the book

Yep I've been in the business well over 2 decades, on both sides of the fence, both direct advising (mges and financial products) and financial audit/compliance of advisers, and there's not a mge dodge I don't know or haven't seen, to which the lenders and their compliance dept, are now much more savvy to back door apps and "rule bending". And of course I'm also aware that there remain a few dodgy brokers and advisers still out there, whom regardless of the legal ramifications of their "guidance" may give clients inappropraite advice and even fraudulent insruction just for the commission and proc fee ... after all unless the client can prove they acted solely on the advisers guidance, its the individual facing the legal music themselves.

Batting away such warnings with, they won't find out, they don't want to reposses, it won't happen to me etc, is really a foolish way to proceed, given that, yes they do, yes they will, and yes the can .... I can only advise on the right way to do this .. and not how to commit fraud or get yourself and others in a pickle .... and thats the kind of advice I think (hope) you came on here for.

Cashback

Buying a property with a deposit that the occupant is going to re-imburse you with is effectively a cashback arrangement and again fraudulent declaration of deposit.

So, lets go back to the beginning ....

You, providing the deposit, can buy a property for parents under a regulated buy to let arrangement.

The app will be generally be based on your earned income (and affordiabity) and not rental income as with traditional buy to let arrangements.

Parents can not provide the deposit, nor reimburse you directly for this.

Parents can claim HB IF the let is run on a traditional landlord/tenant financial relationship and set up (AST, rent reviews, etc).

I'm not trying to be obstructive, really I'm not, my priority is that you don't expose yourself to unnecessary legal risks, as even though it wouldn't affect me if you did, its my professional ethics that stop me from saying "go for your life", "fill yer boots" - as lenders of today are less likely to turn a blind eye and more likely to puruse matters.

Hope this helps ....

Holly x

lonestarfan

Holly I don't quite understand how a 2nd purchase is calculated. If you have an income and a mortgage then your income multiplier has been used up on that first residential mortgage. how do you then get a mortgage on a second property if your income only covers the first house? I take it that you have to have a very large income that when multiplied is equal to or greater than the total of mortgage one plus mortgage 2?

lonestarfan

squeeks wrote: »

The mortgage term has come to an end, so it is time to pay up. If it was a repayment mortgage then the balance would have been cleared. However as this is an interest only mortgage the amount borrowed is now due.

The OP can't borrow more money as she no longer has an income, to old etc... and can't repay the amount borrowed as she hasn't saved a penny it seems. It isn't a bank rule or an FCA rule, it is the agreement she entered into when taking out the loan. A mortgage is a time limited loan, and the time limit has now expired.

Thanks. I do understand what you've written. What I don't understand is why won't the mortgage company just continue to take the money in interest payments . Why must they enforce the signed agreement.
They're still going to get paid regularly. Just because you can enforce an agreement doesn't mean that you have to do so does it?
I'm just pondering and asking a question to gain knowledge.

holly_hobby

lonestarfan wrote: »

Holly I don't quite understand how a 2nd purchase is calculated. If you have an income and a mortgage then your income multiplier has been used up on that first residential mortgage. how do you then get a mortgage on a second property if your income only covers the first house? ?

You can't - your income must cover both mortgages and all other commitments.

Additionally due to the expsoure you now have of 2 mges to maintain, the max LTV on the 2nd property will be restricted, some lenders have 75%, some lenders such as Nationwide have a max of 85%.

IF, you intend to let your "old" home, then if the property is self sufficient (ie rental income at least covers the mge interest & costs), then there are lenders whom will effectively ignore this commitment, when assessing affordability on your new mge application for your new primary residence.

So, whether your income needs to cover both morgages will depend upon the circs and the lender.

Hope this helps

Holly

Simon_gloster

As per my post no.5 on here, a signature us required to pay the debt or be forced out. Maybe 3 years was far too lenient from me. Good on Halifax to hold steadfast in policy and recall their money. If it was my money I'd do exactly the same so I could lend it out to someone st higher rates and with product fees. Normal business rules unfortunately.

lonestarfan

Simon_gloster wrote: »

As per my post no.5 on here, a signature us required to pay the debt or be forced out. Maybe 3 years was far too lenient from me. Good on Halifax to hold steadfast in policy and recall their money. If it was my money I'd do exactly the same so I could lend it out to someone st higher rates and with product fees. Normal business rules unfortunately.

Oh I see. I didn't understand your post which said 3 to 3 years perhaps you meant 1 - 3 years.
I have heard of no room for sentiment in business and yes I realise it's not a charity. Why though are you glad that Halifax have been steadfast?
I do like to help people though and so why can't the lender in this circumstance do a new rate and product fee for these people then. I'd prefer not see anyone especially older parents have the upheaval of having to sell fast.

holly_hobby

Simon_gloster wrote: »

As per my post no.5 on here, a signature us required to pay the debt or be forced out. Maybe 3 years was far too lenient from me. Good on Halifax to hold steadfast in policy and recall their money. If it was my money I'd do exactly the same so I could lend it out to someone st higher rates and with product fees. Normal business rules unfortunately.

I did wonder where Jimbo's 40 yr IO extension (if you can't repay at term end) came from ! (as its generally max of 5 in such circs) - but he hasn't come back to expand upon it - so that will be interesting to hear about if he's been given accurate info.

lonestarfan wrote: »

I do like to help people though and so why can't the lender in this circumstance do a new rate and product fee for these people then. I'd prefer not see anyone especially older parents have the upheaval of having to sell fast.

This is about actually repaying 50k worth of debt in 18 mths (well now its 20 mths given the 1 yr term extension), not the affordability as such (although of course a reduced payrate could enable them to use the saving to overpay during the remaining term).

Unfortunately, the OPs parents effected a 50k interest only loan 5 yrs ago - without any foresight on how to repay it (other than one would imagine sell the property) , so the onus is unfortunately somewhat on them for the situation they now find themselves in,, which would have been clearly apparent at the time of drawdown TBH.

Hope this helps

Holly