Interest only mortgage and in a mess!

regprentice

UKSBD is right. Many examples on this board recently of people receiving similar letters. There is no immediate threat to your mortgage as long as you are meeting your repayments.

So - dont let the letter panic you into making knee jerk decision BUT do consider your options and take sensible action to help remedy the situation.

Funny_old_game

Its noit as if the problem is going to go away?

If they say its from as sale of an antique vase for eg, fine. Don't be a fool and ignore letters.

I see regularly interest only cases with no repayment plan. Then when the time comes people want more time. No. Your agreement is x,y and z. Deal with it.

This idiotic culture of ignoring lenders requests then pleading ignorance or just pleading generally is gone. I leant my mate 20p last week for one week, I want it back. The principle isd identical.

I applaud MMR and all aspects of irresponsible lending and mortgagor ignorance brought to rites.

Anyone with interest only looking to make any changes, borrow more need to understand that in any eventuality you HAVE to keep paying and pay the debt back at some point. Why not tell them what you plan to rely on? They can't say you're a pier and dismiss it. They will retain the evidence for the future to protect their interest.

Its not difficult to understand.

Thrugelmir

UKSBD wrote: »

Do they even follow up on these letters when you are that far away from end of term?


I had 2 or 3 of these letters over about a 2 or 3 year period but never replied to them and never heard anymore.


Admittedly it was only about £600 on an interest only mortgage on a £250k property, but would be interested to know what happens if you just ignore them?

You may be left with no alternative other than to sell the property at the end of the mortgage term. Ultimately it's your problem not the lenders to address. No possibility of seeking recompense for mis-selling . You have been warned.

The vast majority of people are taking some form of action to address the issue already. Praying for a miracle isn't the recommended route to take.

OnTheRun

Kazzie1604 wrote: »

Hello

Wondered if anybody could offer some advice please?
I have IOM which was taken out 10 years ago. At the time I intended to change this to repayment as soon as I could. I am a single parent to 16 year old now and retrained in another career 6 years ago with the hope of earning a better income but the jobs weren't there and I had some health problems as well as hardly any help with maintenance for son as dad has gone to other side of world.
I am self employed but could earn more if I felt better but of course the 'things will get better' approach has not worked and now I have had a letter from mortgage company asking for details of how I intent to pay mortgage at end of term (15 years?)

I don't think I can remortgage this as income is too low (mortgage is 140k). I currently pay £293 a month and could prob afford a repayment on a fixed deal but I know I wouldn't be accepted. I also have £9000 on 2 credit cards and £4600 paying off a defaulted mbna card which I shouldn't have let get to that stage but I buried my head in the sand and let it get to a default which I know will be on credit file for 6 years!
My house has been valued at £300k and I gave been looking at downsizing to 2 bed but there is not much in price and I can't move too far as son still has 2 years of education. In years to come if my son goes off to uni etc I could prob move to a cheaper area but again I can't guarantee this will happen!
Any help would be appreciated....thanks:(

What I would advise is to stop worrying. As long as you continue to pay the lender the agreed monthly payments, you have 15 years to come up with a realistic plan!

As to the letter, you may be able to simply ignore it; I doubt there will be any follow up.

Or you could simply say you plan to repay from savings (you have 15 years to save up!)

Or you could say you plan to sell the property to repay the capital ... in 15 years time, not today!

What pension arrangements do you have? In 15 years time when you are 60, maybe that could be a source of capital? (You can take 25% as tax free lump sum). Or maybe you foresee an nice inheritance in 15 years?

Whatever you tell them, there's nothing they can really do as long as you keep paying the agreed monthly payments. But eventually you will have to repay the capital.

At the moment you say the property is worth about £300k, so who knows what it will be worth in 15 years time? Maybe £650k? And you will still only owe the £140k capital, so if you sold it then, you'd have over £0.5million to buy a new home with (before expenses, etc)

And as you say, your son will be out of full time educaction in 2 years, so hopefully in 15 years he will have flown the nest completely, allowing you to downsize as suggested.

You also say you could be paying more. Well with most interest only mortgages, there is nothing to stop you overpaying if you can - check out the terms.

But you would probably be better using the money to pay off the credit cards (unless you've got them on interest free and hope to keep switching them so stay interest free).
Also, depending on mortgage rate you are on, perhaps you would be better off saving outside the mortgage.

All things an IFA will gladly advise you on ... or even the CAB will probably give you some pointers for starters.

Definitely nothing to worry about, nor be organising an imminent distress sale of the property, today for.



Edit: One other thing to consider, as long as you are not increasing the amount owed or the term, then your existing lender should be able to transfer some or all the existing IOM to a repayment one without even looking at your income.
But why tie yourself down? At the moment you have the best of both worlds. You can pay just the interest in any month if that is all you can afford that month, and if you have any extra in another month, you can overpay the mortgage that month, thereby reducing the capital owed

MortgageMamma

Just to point out, there is no guarantee your property will have equity at in in 15 years time, you should always plan for worst case scenario - I think you are being very sensible trying to address matters now. Don't be knocked by some of the harsh (but well meaning) replies. There are so many ways to restructure your finances and save money in the long term, it all requires a lot of effort initially, particularly learning how to save on household bills and food etc, but it can be done. Have you looked on any of the other boards?

Money saving old style is one of my favourites