Received a letter from Mortgage company asking how we intend to pay off our Interest Only Mortgage 30 October 2018 at 11:57AM in Mortgages & endowments 18 replies 2.2K views

kwas

Hi, First time posting
We have a part repayment / part interest only mortgage. The majority on IO.
Part of the mortgage finishes in 7 years and the rest in 15 years. The first IO payment is due in 7 years and is 50K and the second is in 15 years at £83K . The remaining 42K of the mortgage is on a repayment basis.
Total Mortgage 175K
Our house is worth 375K
We cashed in our ISA linked mortgage policy years ago to do home improvements so have no plan in place to pay off the first 50K.
Not to sound morbid but there are 4 possibilities inheritance wise which would clear the entire debt and more.
We originally had a mortgage with Alliance and Leicester and this got transferred to Santander when they took them over. Santander honoured the deal A&L gave us for the life of the mortgage. After our fixed ran out it reverted to variable base + .5 %. we have stayed on this ever since!
Our payments are low but we cant afford to overpay. (can explain further if needed)

We have never been concerned about the 50K due if we dont have an inheritance payout by then we would sell and downsize, (we live in east devon in a sought after area) we have always understood this. If we get a payout we would pay it off and stay put.

Santander have written to us asking what our plan is with lots of options ie do you have an endowment, are you planning to pay it off with inheritance, downsizing, borrowing from family. Do we need to answer this letter?! My worry is if i do and tell them there is no plan in place could they use this to say we as we havent forward planned they will take away our current deal or force us to repayment?
Thanks any advice much appreciated K

Thrugelmir

Lenders are in essence covering their own backsides. Your existing mortgage will not be taken away. However the clock will remain ticking and they'll expect repayment of the debt by the due date.

If you are unable to overpay at all. How will you cope with rising interest rates in the years to come.

Could you not amend the £50k to be repayable over 15 years. The same as the other part of your mortgage.

foxy-stoat

Just reply and say you intend on downsizing, you cannot rely on the death of a family member and subsequent inheritance payout in 7 years.

Blackbeard_of_Perranporth

kwas wrote: »

Hi, First time posting
We have a part repayment / part interest only mortgage. The majority on IO.
Part of the mortgage finishes in 7 years and the rest in 15 years. The first IO payment is due in 7 years and is 50K and the second is in 15 years at £83K . The remaining 42K of the mortgage is on a repayment basis.
Total Mortgage 175K
Our house is worth 375K
We cashed in our ISA linked mortgage policy years ago to do home improvements so have no plan in place to pay off the first 50K.
Not to sound morbid but there are 4 possibilities inheritance wise which would clear the entire debt and more.
We originally had a mortgage with Alliance and Leicester and this got transferred to Santander when they took them over. Santander honoured the deal A&L gave us for the life of the mortgage. After our fixed ran out it reverted to variable base + .5 %. we have stayed on this ever since!
Our payments are low but we cant afford to overpay. (can explain further if needed)

We have never been concerned about the 50K due if we dont have an inheritance payout by then we would sell and downsize, (we live in east devon in a sought after area) we have always understood this. If we get a payout we would pay it off and stay put.

Santander have written to us asking what our plan is with lots of options ie do you have an endowment, are you planning to pay it off with inheritance, downsizing, borrowing from family. Do we need to answer this letter?! My worry is if i do and tell them there is no plan in place could they use this to say we as we havent forward planned they will take away our current deal or force us to repayment?
Thanks any advice much appreciated K

I have highlighted in bold the salient points. in 7 years time your lender is expecting you to pay off the £50,000. Mortgages have tightened up in recent times about repayment and you need to get your head out of the sand!

kwas

Thank you we have a little leeway each month, i normally overpay the minimum on the credit card and pay the mortgage by DDR what they ask for, when the rates went up, it affected me by about £30.00 so I lowered the overpayment on the credit card and upped the mortgage if that makes sense, Cr card is 2.5K interest free purchases. We have a fixed rate personal loan and fixed rate car loan too. I was worried about contacting them re the 50K incase they took the current deal off me but its certainly a possible option thankyou.

kwas

Thankyou Blackbeard - if we cannot pay the 50K in 6 years time we would put the house on the market with a year to sell it. We are under no illusions here I just wondered how to reply to the letter in the meantime

dunstonh

Santander have written to us asking what our plan is with lots of options ie do you have an endowment, are you planning to pay it off with inheritance, downsizing, borrowing from family. Do we need to answer this letter?

Technically, they can apply to repossession for breach of terms if you don't have a plan and dont answer. Although it wont come to that.

My worry is if i do and tell them there is no plan in place could they use this to say we as we havent forward planned they will take away our current deal or force us to repayment?

They could say you havent planned to repay the debt and they would be right.

You need to sit down and seriously think how you are going do this and, if necessary, start some advanced planning. Is the problem point in 7 years or later? If 7 years, then you need to think about downsizing in advance of that payment being needed. Including the costs of moving and the time it takes. Better you get to decide the price the property is sold for and not the lender.

Plus, you need to consider if downsizing is feasible. After you have paid stamp duty, estate agent, legals, moving costs etc, will there be sufficient raised to cover it all? Most people over estimate the benefit of downsizing.

Once you have a viable plan, then you let them know what the plan is and in most cases they will go along with it if is viable.

kwas

Good advice dunstonh - will do this - I have a friend who is an IFA on mortgages will speak to him too. Thanks for taking the time to reply

Blackbeard_of_Perranporth

kwas wrote: »

Thankyou Blackbeard - if we cannot pay the 50K in 6 years time we would put the house on the market with a year to sell it. We are under no illusions here I just wondered how to reply to the letter in the meantime

I am in two minds. I am not telling my bank when or how my mortgage is paid, as long as I remain in agreement with them!


In this case, I would just say that I have in place a plan that will pay off my part loan on the due date and see what their response is.


Note: Since 2012 and my heart event, I have been in continuous negotiation with my lender about payment!

Blackbeard_of_Perranporth

Dunstooth is more accustomed to these matters and will help more than BoP can!

getmore4less

The other issue with downsizing in 7 years is the rest of the mortgage you still won't have a plan for that unless you realy do downsize.


Can you get something for around £250k as that is what your current mortgage funding will support(less if you can't port the great rate)

You don't want to be doing it twice.

Living beyond your means with loans for stuff funded by not having a repayment plan for the house debt and a very cheap rate on the mortgage.

You might get lucky.

Any of these relatives or kids that can bail you out for the £50k to buy some time.