Interest-Only Mortgage - No Repayment Vehicle

[Deleted User]

Hi all,


I was wondering if I could get some advice.


In 2007/2008, I re-mortgaged my home (an apartment), which I bought in 2005/2006 for £110,000 with a 100% mortgage of £145,000 on an interest-only basis.


The lender sent someone to value the apartment and he told me at the time that the property was worth £175,000 (I now know this was seriously inflated, even then). The mortgage was granted on this basis.


Repayment vehicles were never discussed. In fact I'd never heard of one until I started looking into this recently. I was first-time buyer that hadn't even rented before.


I also didn't (and still don't) have any life insurance. When they asked I explained that I had death in service benefit in work, and they accepted this. I now know that I should really have had a separate policy in place.


Of course now, the apartment is worth between £50,000 and £60,000 (I live in Northern Ireland), and I am stuck with a mortgage of £145,000, with no way of paying at the end of the term.


I plan on switching to repayment shortly (in the next few months), when I finish paying off a large debt I built up as a student (even my student loan is paid off), to try and make some kind of small dent in the capital.


Was this mortgage mis-sold to me? If so, is there anything I can do about it, or do I just have to accept that it's all just a result of my naivety/idiocy?

R_P_W

At what point have you been mis sold?

What was your plan to pay the capital when you took out an interest only mortgage?

Thrugelmir

kantboy wrote: »

Was this mortgage mis-sold to me?

You applied to release the equity and presumably wasted the money .

Was your choice. No one sold you anything.

[Deleted User]

R_P_W wrote: »

At what point have you been mis sold?

What was your plan to pay the capital when you took out an interest only mortgage?

Mis-sold from the point of view that the mortgage wasn't suitable for me, that the valuation was inflated, that no fact finding was completed during the sales process and therefore the adviser did not have full knowledge of my financial situation, and that it wasn't properly explained that the future price of the property might not be enough to cover the mortgage?


In regard to a plan for repaying the capital - I guess I thought I would just sell the property....


I'm sure I really do sound naïve, but at the time I found it very difficult to comprehend that something that was apparently worth £175,000 could only be worth around half that only a few years later.


After much reading since, I now understand that I didn't 'buy' anything. I essentially took out a loan secured against something whose value can fluctuate wildly. I certainly have learned the hard way....

[Deleted User]

Thrugelmir wrote: »

You applied to release the equity and presumably wasted the money .

Was your choice. No one sold you anything.

And why do you presume that I 'wasted' the money - do you know me? Do you know my circumstances?

flashg67

Putting aside any naivety or whatever on your part, surely the lender has a duty to ensure the loan meets certain requirements in relation to what the lender would lend as a percentage of your flat, affordability etc?

Something doesn't seem right to me as to why a lender would inflate a property value - this is irresponsible and as such, if you still have all the paperwork, it's worth taking further imo - mortgage brokers and advisors are regulated by their respective bodies after all.

Good luck paying the loan off - I don't think you'll be able to avoid paying the debt off but you'll be surprised how quickly it reduces once you start over paying

[Deleted User]

flashg67 wrote: »

Putting aside any naivety or whatever on your part, surely the lender has a duty to ensure the loan meets certain requirements in relation to what the lender would lend as a percentage of your flat, affordability etc?

Something doesn't seem right to me as to why a lender would inflate a property value - this is irresponsible and as such, if you still have all the paperwork, it's worth taking further imo - mortgage brokers and advisors are regulated by their respective bodies after all.

Good luck paying the loan off - I don't think you'll be able to avoid paying the debt off but you'll be surprised how quickly it reduces once you start over paying

Thanks for the advice Flash. Yes, plans are afoot to change to capital repayment and begin making overpayments. I hope I can get the debt to a manageable level sooner rather than later.


It's just heart-breaking to think that in my first foray into the property market that I've ended up owing around £70,000 for nothing. But I guess there are many more in the same boat.


Incidentally, I only owe £142,000 now, as the lender knocked off £3,000 in total, from 2 occasions where they'd said some letters they'd sent either weren't clear enough or contained inaccuracies!

Thrugelmir

kantboy wrote: »

And why do you presume that I 'wasted' the money - do you know me? Do you know my circumstances?

You could have subsequently repaid the money into the mortgage to reduce the debt owed.

[Deleted User]

Thrugelmir wrote: »

You could have subsequently repaid the money into the mortgage to reduce the debt owed.

I don't have that money any more, but I didn't see a penny of it.


And it didn't go on my student debt, I paid that off through sheer hard work.


I'm not going to say on this message board what the money was used for - just don't presume to know everything about the circumstances of those that post here seeking advice.

PeacefulWaters

There are certain pockets of Northern Ireland where certain members of local communities are keen to ensure that locals can get cheap housing.

They behave reprehensibly towards outsiders trying to buy property on the market and will often damage the property itself to deter potential purchasers.

The price falls dramatically. The locals buy the house on the cheap. And they think they've won.

Then every other property in the area collapses in value and they wonder why.

It's a severely messed up market place that some lenders wouldn't touch with a barge pole.

getmore4less

Why go to repayment?

If you can't afford that at any time you will get in to arrears.

Stay on interest only and overpay you have more control over the contractual payment.

With over £80k+ debt you could look at bankruptcy.