Evidence Required Repayment Plan Interest Only Mortgage

BoyBach

I took out a 12 year interest only mortgage 5 years ago which ends 2021. Got a letter today from my provider Lloyds who insist I provide details of my repayment plans for the principal sum at the end of the mortgage. I had always planned to sell the property in 2018 to clear the mortgage. I do not have a repayment vehicle in place although, I have 33% of the mortgage value in cash savings which I would like to keep as some security meanwhile. I have 65% equity in my property at todays marketplace. My question is can Lloyds force me to sell my property now to repay my mortgage earlier than the finish date? Or can they insist I reduce my mortgage using my cash saving. And why are they getting so nervous. Regards!

TrickyDicky101

No. As long as you have complied with the contractual terms you agreed to when you took the mortgage out, Lloyds can whistle. File their 'demand' in the bin.

BoyBach

TrickyDicky101 wrote: »

No. As long as you have complied with the contractual terms you agreed to when you took the mortgage out, Lloyds can whistle. File their 'demand' in the bin.

Thanks for your input. I have made all regular payments as required and I fully understand the terms of my "Interest Only" mortgage. It must be paid up in full by the end of the mortgage term or I will be in default. (simples). I accept this is my responsibility. Looks like they are trying to apply changes to the terms of our mortgage agreement by stealth and some bluster, so as to provide them with comfort?

stator

Have you read the full T&Cs? Many banks new T&C will allow them to demand this sort of thing and may force an end to the mortgage if you refuse. I don't know if that is enforcable or not.

Thrugelmir

BoyBach wrote: »

Looks like they are trying to apply changes to the terms of our mortgage agreement by stealth and some bluster, so as to provide them with comfort?

Not at all. Lenders are under a directive from the FCA to ascertain the status of all interest only borrowers. As customers will have to be dealt with fairly. By stating your choice. Lenders can hold you to it.

BoyBach

Thrugelmir wrote: »

Not at all. Lenders are under a directive from the FCA to ascertain the status of all interest only borrowers. As customers will have to be dealt with fairly. By stating your choice. Lenders can hold you to it.

As an "interest only" borrower, will my declaration to Lloyds to sell the property prior to the end of the mortgage to cover the final payment be sufficient? (must be thousands of us)

dimbo61

If you have 33% of the mortgage value already saved and 65% equity then you are much better off than hundreds of thousands of Interest Only borrowers.
Many people have one home with an Interest Only mortgage and are happy to pay the IO amount every month, all the rest of there income is Spending money till they get to 65 or the end of the mortgage term.
What happens if you cannot sell in 2018/2021 as the market has crashed or rates are sky high.
Where will you live once you have sold your home?
The lenders are writing letters now to Warn You that the S**t with hit the fan real soon.How many thousands of other home owners will have to sell in the next 5/10 years due to IO mortgages

BoyBach

Thanks for all comments, I think I will put my property up for sale, pay off the mortgage and and use the equity to downsize ready for my dotage.

dunstonh

The letter from Lloyds also goes some way to protect themselves. They will have a nice audit trail over the years of warning you about interest only and asking what your repayment vehicle is. So, when the less responsible people start to complain in years to come that they didnt know interest only meant interest only, they can counter the complaint.

It also reduces the impact as well as it may give the people, with interest only and no plan to repay it, the push they need to sort it out before its too late.

steeeb

Could you afford a repayment mortgage? Why not change to repayment using your savings - would mean a small mortgage.

Or do you not like/want the house?

JimmyTheWig

BoyBach wrote: »

I think I will put my property up for sale, pay off the mortgage and and use the equity to downsize ready for my dotage.

If you can't afford more than the interest-only payments on the mortgage then this is probably a better plan than to wait a further 4 years to do so.

But if you are still happy with your original plan then I don't think you have to change that.
I'd write to Lloyds and say

BoyBach wrote: »

I have 33% of the mortgage value in cash savings

and provide evidence of this amount.
33% saved up in the first 5 years of a 12 year mortgage sounds reasonable to me.

can they insist I reduce my mortgage using my cash saving.

No, they don't want you to do this. If you've got the money sitting there they'll be happy. They just don't want to end up in the position come 2021 where you turn round and say you don't have the money to repay the loan and you didn't understand at the time that you would have to repay it.

[Though depending on the (net) interest rate on your savings, the interest rate on your mortgage and how much you think you need as a safety net if might be worth paying some of this off the mortgage.]