Letters from mortgage provider requesting info about how I plan to pay off mortgage 21 January at 9:09AM in Mortgages & endowments 9 replies 471 views

billygoat24

I have a 20yr mortgage which ends Dec 2027. Originally it was repayment mortgage, but I switched to interest only early on. I have no arrears and have never had any arrears. I received a letter and phone calls requesting I inform them how I intend to pay off the mortgage at the end of the term. I received a couple of letters like this periodically several years ago, which I ignored. I have no repayment vehicle in place, but I'm confident I will either be able to repay the full amount or sell the property (although I have no way of proving this right now). I owe approx. 290K, the property is worth approx. 700K. In the event I do not have the funds to pay off the mortgage, I plan to make the decision to sell 2 years before the mortgage ends. What legal obligation do I have to provide evidence of a repayment vehicle to my mortgage provider at this stage? Also, what action can they take if I don't?

Edi81

Nothing legal on your side but it’s a regulatory requirement on theirs. 

Last thing they want is to have to repossess at the end. 

Annisele

As Edi81 said, it's a regulatory requirement. Right now, the bank isn't really all that interested in how you plan to repay the mortgage (it'll become very interested around December 2027, but it doesn't care much right now).

But the bank does care about protected itself from future complaints, and about reducing its own future legal costs. If it writes to you every so often reminding you that you've got a massive great amount to repay in 2027, then it's much harder for you to get to the end of the term and go "I never changed the mortgage to interest only; it's the bank's fault I still have a debt; I'm not paying". So long as your plan works out, the bank will be happy. (You have enough equity that it'll be happy anyway - but banks strongly prefer to avoid the hassle of repossessing out from under people.)

Also, for some people the reminders are genuinely helpful. Sometimes you get a case where a person switched to interest only ages ago because they were in financial difficulty, with the genuine intention to switch back "some day", then they put the whole issue to the back of their minds and get surprised when the end of the term comes along and the bank wants its money. Reminders to those people sometimes do produce action, whether it be switching back to repayment (possibly over a longer term), downsizing, or doing some other thing that will reduce hassle and costs to the bank at the end of the term.

silvercar

We had this a few years ago. I ignored the letter and they sent more. In the end it seemed easier to comply. I listed a couple of endowment policies that were still running that were due to mature in 2016 and 2019 and put savings for the rest. Now they send me reminders every couple of years repeating the information I gave them - even though 2016 and 2019 have past. The letter now says to tell them if anything has changed. I ignore the letter and they haven't contacted me, so I guess it is all automated and no one is reading it. As long as they have a response they are happy.

ACG

Why be awkward about it? Why not give them what they want? 
There is no legal requirement your end as far as I am aware but their could be a contractual requirement now or down the line.
They could prevent you switching to a new deal by changing the T&Cs for any new product switches.

billygoat24

ACG said:

Why be awkward about it? Why not give them what they want? 
There is no legal requirement your end as far as I am aware but their could be a contractual requirement now or down the line.

Because I am expected to have a repayment plan in place, and the only one I can give them right now is that I will sell the property at the end of the mortgage.  I am worried that would not be acceptable to them and I don't know what action they could take. I don't expect to be remortgaging or switching to a new product.

AnnieB2018

If you tell them you will sell your property in order to repay the mortgage, they will want something concrete from you at around 2025…maybe a property listing etc. I don’t imagine they will let you go until the repayment date and start marketing the property then.

MattMattMattUK

AnnieB2018 said:

If you tell them you will sell your property in order to repay the mortgage, they will want something concrete from you at around 2025…maybe a property listing etc. I don’t imagine they will let you go until the repayment date and start marketing the property then.

They have no option but to wait until the repayment date as per the mortgage contract the OP will have until the repayment date to repay, they cannot start enforcement action for a breach of contract (failing to replay) until after the breach has occurred. 

Silvertabby

The bank is just covering their own six, so you can't get to 2027 and then claim "poor me - I'm a little old pensioner and the nasty bank wants to throw me onto the streets".

You may be on the ball but, sadly, so many aren't.  A friend, who used to work in a bank, told me of a very distressing incident involving a couple who somehow believed that 'interest only' was the same as 'interest free'.  In their case, they didn't have enough equity to downsize....

user1977

billygoat24 said:

What legal obligation do I have to provide evidence of a repayment vehicle to my mortgage provider at this stage? Also, what action can they take if I don't?

What exactly does the letter say? Does it suggest you do have a legal obligation to provide evidence? Does it say they will take action if you don't?