Mortgage Prisoners guide - What can I do?

MSE_Kit

We'd like to hear your thoughts and experiences on being a mortgage prisoner and will be updating the Mortgage Prisoner guide with your feedback. 

If you haven't already, join the forum to reply.

Peridot67

I am a mortgage prisoner.  I took out the mortgage 14 years ago, it was a 100% mortgage on a shared ownership property - my mortgage company is in administration.  My circumstances have now changed and I am now disabled and having to pay a repayment mortgage out of my disability benefits - despite this, my mortgage payments are up to date.  I don't intend to stay here, I need a property without stairs now and want to sell within the next few years. If I could transfer to an interest only mortgage, I could reduce my mortgage from over £350 (its on a variable rate) down to around £30 pcm and pay the mortgage off out of the sale - allowing me to save up for a move, as equity isn't released until a sale completes.  ATM the remaining outstanding on my mortgage is less than £50k though so I am unsure what to do. Out of my share value, less than 50% is mortgage outstanding so its a pretty safe bet for any mortgage company even if property value drops. Some people pay more for a car than what's left outstanding on my mortgage yet, I am a prisoner to mine because of my current circumstances. 

GraceCourt

We were mortgage prisoners until recently, because Santander Bank took over the building society with which we originally mortgaged, and although we owned outright the home that we had built for our retirement as well as a half-share of the detached bungalow in which an elderly relative was living, Santander refused to give us a new mortgage because "we couldn't afford it"!  For five years they repeatedly threatened to repossess our home, and although we explained that my wife was now the sole carer for her mother (in her nineties), thus preventing us from selling our home and retiring, they were of the view that she could be moved into a nursing home so that we could sell our present home and do so.  Appalling. 

We have never been in arrears with any mortgage or indeed with anything else, and in fact over the last five years we repaid over £100,000 of the interest-only mortgage - LTV of less than 40% - but still Santander kept threatening repossession.  We were advised that in the circumstances no District Judge would award them possession. But the sad result of this is that when my mother-in-law died and her bungalow was sold (my wife's half-share wasn't enough to clear the Santander mortgage completely), my wife was so upset by the five years of threats that she no longer wanted to move, so we sold the retirement home we'd built and repaid what was still owing to Santander... which of course was now eager for us to take a new mortgage with them at an even higher rate during the lowest interest rates in living memory!

The pressure must be even worse for those with insufficient equity to do what we did.  And no, Santander didn't ever apologise for their five years of threats and blustering.  The worst bank in the UK.

fronty

GraceCourt said:

Santander didn't ever apologise for their five years of threats and blustering.  The worst bank in the UK.

That is shocking, but sadly doesn't really surprise me. 😕

MWT

GraceCourt said:

We were mortgage prisoners until recently, because Santander Bank took over the building society with which we originally mortgaged, and although we owned outright the home that we had built for our retirement as well as a half-share of the detached bungalow in which an elderly relative was living, Santander refused to give us a new mortgage because "we couldn't afford it"!  For five years they repeatedly threatened to repossess our home...

It does sound like a ghastly experience, but it feels like there is a piece missing from this situation, what was the basis for the repossession..?

Given you mentioned Santander refused to give you a new mortgage, it sounds like you had an interest only mortgage which reached the end of its term and required repayment, but you didn't have the income to meet the affordability criteria for a new mortgage, or the cash to pay off the loan so you were in default when the mortgage ended?

If so, that doesn't put you in the 'Mortgage Prisoner' category, just unfortunately in the position where your repayment vehicle plans didn't work out as you expected.

Perhaps I've got the wrong end of the stick though and there was some other basis for the repossession attempts?

GraceCourt

MWT said:

It does sound like a ghastly experience, but it feels like there is a piece missing from this situation, what was the basis for the repossession..?

Given you mentioned Santander refused to give you a new mortgage, it sounds like you had an interest only mortgage which reached the end of its term and required repayment, but you didn't have the income to meet the affordability criteria for a new mortgage, or the cash to pay off the loan so you were in default when the mortgage ended?

If so, that doesn't put you in the 'Mortgage Prisoner' category, just unfortunately in the position where your repayment vehicle plans didn't work out as you expected.

Perhaps I've got the wrong end of the stick though and there was some other basis for the repossession attempts?

Yes, the interest-only mortgage came to its end but although we had our retirement home to go to - as planned - the need for daily care for my mother-in-law prevented us selling-up and going to live there.

We were "mortgage prisoners" because there were cheaper mortgages available but no lender would take account of the huge equity in the other properties because of the so-called "affordability rules" and although Santander had cheaper mortgage products (we would have been happy to take out a new repayment product) they refused to do so because we "couldn't afford it" even though we were over-paying £500/month for most of the five years... this went up to £1,000/month towards the end.   Of course, they were making more money from the higher interest rate!  But obviously we could afford the cheaper products, they just wouldn't allow us to transfer to one.

The threats of repossession were because the original mortgage had come to an end and we would only deal with the Bank in writing: they tended to lose letters and records of telephone calls internally but we had Royal Mail proof of delivery for letters served on their registered office.  That was one reason why there was actually little likelihood of a District Judge awarding them possession.

MWT

That still doesn't make you a 'mortgage prisoner' though, just someone with plenty of equity and not enough income.

You didn't have a mortgage to be a prisoner of at that point, it had ended and was in default and for family reasons you didn't want to execute on the original planned repayment vehicle.

All very stressful of course but not in the 'prisoner' category as you were not trapped in an expensive mortgage and unable to leave it you just wanted a new mortgage but did not qualify by any other lenders affordability standards. 

GraceCourt

MWT said:

That still doesn't make you a 'mortgage prisoner' though, just someone with plenty of equity and not enough income.

You didn't have a mortgage to be a prisoner of at that point, it had ended and was in default and for family reasons you didn't want to execute on the original planned repayment vehicle.

All very stressful of course but not in the 'prisoner' category as you were not trapped in an expensive mortgage and unable to leave it you just wanted a new mortgage but did not qualify by any other lenders affordability standards. 

I think we will have to agree to differ on this, and let other forum users make up their own minds... "not enough income"?  I'm not sure why you keep missing the fact that we could overpay £500 per month but were prevented by the so-called "affordability rules" from taking out another product, cheaper or otherwise, either from Santander or from another mortgage provider. 

MWT

GraceCourt said:

I think we will have to agree to differ on this, and let other forum users make up their own minds... "not enough income"?  I'm not sure why you keep missing the fact that we could overpay £500 per month but were prevented by the so-called "affordability rules" from taking out another product, cheaper or otherwise, either from Santander or from another mortgage provider. 

Happy to let others judge, the definition of being a 'mortgage prisoner' is clear enough.

The affordability criteria the lenders use are mainly based on income and the potential term of a mortgage is based mainly on age.

It isn't unusual as you approach retirement age to be perfectly able to overpay a decent amount on an old interest only mortgage but still not qualify for a new interest only mortgage (the rules have changed a lot in the last 25 years) or a repayment mortgage (as the term would be a lot shorter).

The affordability rules include a 'stress test', so it isn't just about being able to meet the payments now, but also later as you move into retirement and salary turns into pension, and perhaps after a while, unfortunately, only one of you remains to make the payments... Having equity in other property is great, but but that doesn't get you over the 'affordability' hurdle no mater how old you are, income streams are the key...

We see quite a few posts on here from people who (unlike you) did not have a plan for their repayment of an interest only mortgage that has reached term and they struggle to find solutions.

Fortunately you had a plan and it was only the timing that was causing you issues. I am surprised though that you didn't have any options with the available retirement products like a RIO or Equity Release, but that is academic now as you've resolved the problem and paid off the mortgage.

kevinb3

in the past what i carnt get is that i carnt port my mortgage to cut debt by half being told that i carnt afford to pay less and now there's  2 year fixed for between  £200 and£300 £1000 less than paying now but still carnt afford according to the brokers

Gillygolly

Hello.

I am in the biggest of messes. 
We believe we are a Mortgage Prisoner - but Kensington refuse to issue a letter, because we only have 7 months to run.
The mortgage began in 2007 for 15 years and in that time we have paid over £210,000 in interest on a £280k loan. 
We have always paid on time by direct debit, but we have never been able to meet the lending criteria to move to a new lender.
Which is made by worse because we are in our 60s.

WestBrom will lend to us over 8 years with a brilliant deal - we pay the same per month, but 60% is against the capital and that will in those 8 years take the debt to below 50% of the current LTV ratio.

We run our own business and in that time expect to either sell-up and pay it off or retire and downsize. 

As things stand, Kensington are playimng hard-ball (well we are a very profitable customer and if I cannot move away, I default and they sell it and keep the profits on that too).
We have been running a complaint against misselling with the FCA since 2015 and although we have been told we should "get a refund of interest" - it hasnt happened and there's no indication of what that can be.

So. As things stand. In 7 months we will lose our home. 
There are currently my family of 5 (all 18+) in the house and we foster care too! So what happens to the Foster Child? 

All true. 

Desperate for help.