Parents bought house for £12K hav paid bac £140,000 still owe £150,000 House worth apx £100,000 HELP

DancingMan

Sorry I am new here and don't fully under the replying system  housebuyer143 said:

To still owe £150k they must have borrowed a lot against this house. If they spent the money then they have not been exploited have they, they got what they asked for at the time.

Are they on interest only mortgage? I imagine for them to get into this state they probably are and it explains how they paid so much in interest but still owe the large amount.

There was so much less regulation in the mortgage market pre financial crash and so that things were possible such as interest only, borrowing 120% LTV etc. Many people were not aware what they were signing up to. 

They borrowed about £60k additionally and yes you are correct they are interest only and through naivety or ignorance or other unpleasant terms they were not aware of the situation their interest only mortgage left them in. 

The original terms of the mortgage were part part so therefore interest and capital but as it moved through 3 different lenders over time this appears to have changed but they have no memory or record of having been told this, however their recent statements do make that clear. 

We have had professional advice and your comment on the lack of regulation is exactly what has been said to me, the situation would not be allowed to happen now. Indeed you are right they had no real understanding of what they were signing up too.

MWT said:

DancingMan said:

This is complicated but any help would be much appreciated....

Sadly, I don't think it is all that complicated...

They borrowed more than they could repay and have left it far too late to fix the problem with the time remaining on the mortgage...

Do you know when the current mortgage term ends?

From what you've said, they are going to need to sell the house and raise another £50k somehow just to clear what they owe, so some idea of the time available would be helpful.

They may be an extreme case, but they are not alone in mistaking the lax 'self-certified' lending criteria as a route to large amounts of money without any thought to the future.

No obvious way to get any of what they owe reduced through a complaint at this stage, but more details on the most recent occasion upon which the mortgage was changed or additional sums borrowed might open a window of opportunity...

Their current term ends in about 2 years I think and I fear you maybe be correct the only option maybe to sell the house and either approach the leader for a deal or finding additional capital, the latter I did not think is a realistic option. 

The bit that confuses me, as mentioned above, is that the original contract was for interest and capital, it was then moved through 3 different lenders ,the current one they have been with since 2012 but at no point has anyone actually said to them have you got an endowment to pay this at the end (yes I know this was their responsibility)..... but the lender who took it on then was perfectly happy to continue taking interest money (and yes that is their Raison d'être) but not put in place the correct procedures to take down the capital debt. 

The lax 'self-certified' lending and friendly mortgage advisor from the small town who knows your family and tells you don't worry its all good just sign here .... was a huge part of the problem. 

silvercar

To a certain extent the amount they have paid to the current lender is irrelevant. What is concerning now is that they owe 150k on a house worth 100k. How has that happened? Either property values have plummeted in their area or they have had some sort of mortgage product where they don’t pay interest and the interest is accumulated onto the mortgage. It may be helpful to dig into this and find out why. If it isn’t one of those 2 reasons then it smacks of irresponsible lending. Equity release products are now restricted so that you can never own more than the property is worth, so it may be worth finding out when these loans occurred.

DancingMan

Spendless said:

I have relatives who did pretty much the same. Then attempted to sort it out with a 20ish year IO mortgage as they neared retirement with no thought to what they'd do when the term was up and they'd made no plan to pay the rest off thinking 'they'd both be dead by then' - only 1 of them was. Another relative has had to step in and buy the property to give their parent somewhere to live. 

I fear that might be the course of action we have to take.

noitsnotme said:

DancingMan said:

 Over time they borrowed against it

This is the key part.  How much extra have they borrowed against it and on what terms?

About 60k and it was added to the mortgage when moved from one lender to the other. I will have to look into the detail of the terms but I would have assumed that they were out added to the original debt under the original terms. It is is something I will look at however. 

MattMattMattUK

DancingMan said:

Spendless said:

I have relatives who did pretty much the same. Then attempted to sort it out with a 20ish year IO mortgage as they neared retirement with no thought to what they'd do when the term was up and they'd made no plan to pay the rest off thinking 'they'd both be dead by then' - only 1 of them was. Another relative has had to step in and buy the property to give their parent somewhere to live. 

I fear that might be the course of action we have to take.

noitsnotme said:

DancingMan said:

 Over time they borrowed against it

This is the key part.  How much extra have they borrowed against it and on what terms?

About 60k and it was added to the mortgage when moved from one lender to the other. I will have to look into the detail of the terms but I would have assumed that they were out added to the original debt under the original terms. It is is something I will look at however. 

The thing is, if they borrowed £60k on an interest only mortgage they would only owe £60k as they would have been paying the interest for the last 20+ years, so there is obviously more to this than you have initially been told. Either they have borrowed more money after the initial £60k, or have take out some kind of equity release rather than a standard mortgage. 

DancingMan

 elsien said:

In what way do you feel they have been exploited? How many loans have they taken out against the house over the years?
When was the last loan/remortgage that they took out? 

The last remortgage was in 2012 the last loan against it was, I believe, in 2007. As I have mentioned above it is my understanding they borrowed 60K however I am still working through figures, as this has come to light recently. 

I feel they have been exploited because they have paid back a significant amount of money to all of the lending agencies (and yes they borrowed a significant amount but not nearly as much as they will have to pay back) but at no point has anyone said to them.. .this is the situation you are going to be in and indeed are in now lets look to how we resolve this. 

They have been happy to take the money and then they will be happy, it seems to me, to take the asset and leave my parents  with nothing despite having paid almost the full amount back in interest. 

The primary exploration issue I believe is that the debt taken on with the current lender in 2012 was £150,000, they have paid this organisation around £140,000 and in 2 years they will be called upon to pay £155,000 to complete the mortgage. Maybe I am wrong but that feels to me to be exploitation. 

theoretica

If the borrowed about £60/70k but now owe 150k then at some point did they have quite a patch of not making their payments? - as even in interest only the capital owed does not go up.  So it looks to me as though they may not have been making the payments they agreed to or were asked for.  Which is stating the obvious - but rather weakens any case about the level of payments the lenders asked for not being enough to cover the capital. 

MattMattMattUK

DancingMan said:

 elsien said:

In what way do you feel they have been exploited? How many loans have they taken out against the house over the years?
When was the last loan/remortgage that they took out? 

The last remortgage was in 2012 the last loan against it was, I believe, in 2007. As I have mentioned above it is my understanding they borrowed 60K however I am still working through figures, as this has come to light recently. 

I feel they have been exploited because they have paid back a significant amount of money to all of the lending agencies (and yes they borrowed a significant amount but not nearly as much as they will have to pay back) but at no point has anyone said to them.. .this is the situation you are going to be in and indeed are in now lets look to how we resolve this. 

They have been happy to take the money and then they will be happy, it seems to me, to take the asset and leave my parents  with nothing despite having paid almost the full amount back in interest. 

The primary exploration issue I believe is that the debt taken on with the current lender in 2012 was £150,000, they have paid this organisation around £140,000 and in 2 years they will be called upon to pay £155,000 to complete the mortgage. Maybe I am wrong but that feels to me to be exploitation. 

Based on the numbers in your most recent post they would have had to be paying £1,000 pcm since 2012 whilst having an interest rate of 8.5% during a period when mortgage interest rates were in the 0.5-2% range. I think you are only being told a very small part of the story here, there is either significant additional borrowing and/or no payments were made for much of the period. 

elsien

DancingMan said:

 elsien said:

In what way do you feel they have been exploited? How many loans have they taken out against the house over the years?
When was the last loan/remortgage that they took out? 

The last remortgage was in 2012 the last loan against it was, I believe, in 2007. As I have mentioned above it is my understanding they borrowed 60K however I am still working through figures, as this has come to light recently. 

I feel they have been exploited because they have paid back a significant amount of money to all of the lending agencies (and yes they borrowed a significant amount but not nearly as much as they will have to pay back) but at no point has anyone said to them.. .this is the situation you are going to be in and indeed are in now lets look to how we resolve this. 

They have been happy to take the money and then they will be happy, it seems to me, to take the asset and leave my parents  with nothing despite having paid almost the full amount back in interest. 

The primary exploration issue I believe is that the debt taken on with the current lender in 2012 was £150,000, they have paid this organisation around £140,000 and in 2 years they will be called upon to pay £155,000 to complete the mortgage. Maybe I am wrong but that feels to me to be exploitation. 

I was wondering about irresponsible lending but they would appear to be out of time for that. I guess that's where you hit the brick wall with the ombudsman?
What mortgage rate were/are they on, and is it repayment or interest only? 
Did they have any sort of plan for when the term ended? You say they don't live extravagantly but they managed to run up 60K worth of debt. That's not intended to be a judgement but more around unpicking what has been going on in the background to get to this point. 

theoretica

DancingMan said:

The primary exploration issue I believe is that the debt taken on with the current lender in 2012 was £150,000, they have paid this organisation around £140,000 and in 2 years they will be called upon to pay £155,000 to complete the mortgage. Maybe I am wrong but that feels to me to be exploitation. 

140k over 11 years is 11.6k a year - so if that is interest only, this is around 7.8% interest rate.  So this guide might be relevant https://www.moneysavingexpert.com/mortgages/mortgage-prisoners/

Brie

you* need to get all the information about what has been borrowed from purchase date onwards.  This may be possible with a subject access request (SAR) but I wouldn't be surprised if they can't give anything regarding what happened prior to them taking on this mortgage.  Be sure to ask for not just the contracts, copies of any system notes, letters and a full statement showing payments and interest charged.  

*by "you" I mean your parents obviously as the bank should, quite rightly, not talk to you without their consent.

Good luck with helping them sort this - it's certainly a mess and must be a big worry for all concerned.