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

Nearlyold

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. 

Do you mean the total amount owing at the outset of the remortgage in 2012 was £150,000 or that it has subsequently grown to this amount?

What is/was your parents understanding of how mortgages/loans work?

NB it's not really correct to say your parents have had "nothing", unless they've been constantly underpaying and built up arrears they must have spent the cash they received at some point.

DancingMan

Thanks again for the comments. To try and answer some of the queries. Yes there was a brief period when my one of my parents was hospitalised and they had agreed a reduction in payments during this period. 

elsien said:

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. 

Yes that is where we have hit the brick wall with the ombudsman. 

It started as "part/part" but is interest only and they failed to recognise this and understand the consequences until fairly recently. The 60K was over a long period of time and it had been used in the noughts for living costs and and a small house alternation. I am very aware that this was money borrowed and so are they but it is the level of interest. 

They didn't live extravagantly but I believe they are "guilty" of living just above their means for an extended period of time however I believe others i.e. the lenders have taken advantage of this. I know some will say it is their doing so suck it up .... but they have paid money back, the issue is how much and without any intervention from the lender to deal with the capital. 


MattMattMattUK said:

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. 

Sorry I have just checked back on the figures I have and they have paid back £120,000 since 2012. There was a period of very small payments but apart from that it varied wildly. I will have to review this further. 

theoretica said:

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/

Thanks.

silvercar

There are nuclear options for dealing with this. If they have no savings and no other real assets then they could find themselves a rental property and walk away from this mess.

housebuyer143

As others have said, it doesn't make sense..

 Interest only would explain the large amount paid back with no capital reduction but it does not explain them owing £150k on £60k borrowed. Assuming the payments were made which seems to be the case apart from a small period, they would only owe what they borrowed, £60k. There isn't anyway they could owe £150k unless they took more borrowing than they have told you. 

You are probably going to have to trace this back to it's inception and see what has happened and when as even with low regulation, and even on an interest only you wouldn't end up owing at the end more capital than you borrowed.

MattMattMattUK

Even based them having paid back £120k since 2012 that only lowers the monthly payment to an average of £850 pcm and an interest rate of 6.8% which I would be very surprised if that is the rate on a standard mortgage. If they were on interest only then that rate would be very high, for most of the last decade 1.6-1.8% on interest only looks about right. You also need to look at how the borrowing went from £60k in the late nineties to £150k in 2012, that would appear to average around £6k a year, was this used to pay down other debts, did they borrow the additional £90k in 2012 or had there been multiple borrowing taking place over the past fifteen(ish) years?

DancingMan said:

They didn't live extravagantly but I believe they are "guilty" of living just above their means for an extended period of time

It can have a huge cost, I know someone who has similarly burned through over £200k of equity from house price appreciation and has significant unsecured debts by living around 10% beyond their means for the last twenty years, doing it can have a huge impact on people's lives.

DancingMan said:

Yes that is where we have hit the brick wall with the ombudsman. 

It started as "part/part" but is interest only and they failed to recognise this and understand the consequences until fairly recently. The 60K was over a long period of time and it had been used in the noughts for living costs and and a small house alternation. I am very aware that this was money borrowed and so are they but it is the level of interest. 

They didn't live extravagantly but I believe they are "guilty" of living just above their means for an extended period of time however I believe others i.e. the lenders have taken advantage of this. I know some will say it is their doing so suck it up .... but they have paid money back, the issue is how much and without any intervention from the lender to deal with the capital. 

I cannot see this as lenders taking advantage of them, at face value it appear that they have not take out complicate products and have opted for an interest only mortgage, a choice which they seemed fully able to pay and so irresponsible lending would not be an issue. If one could ignore the interest cost on a mortgage or loan then we would all be able to pay them off quickly or cheaply, they chose to only pay the interest an that was their choice, it really cannot be regarded as taking advantage of them. 

The bigger issue perhaps though is how it has got to this stage, most lenders will not allow people to borrow more than the property is worth, yet somehow they owe £50k more than the property is worth which is almost impossible without a house price crash or equity release. 

theoretica

I guess that is the other question - are you confident about the house value? Where did you get the very round number of £100k from? Has it gone down because of cladding or anything? 

MWT

MattMattMattUK said:

The bigger issue perhaps though is how it has got to this stage, most lenders will not allow people to borrow more than the property is worth, yet somehow they owe £50k more than the property is worth which is almost impossible without a house price crash or equity release. 

Equity release seems very unlikely as they are only just reaching pension age now, and could not have been done without clearing the existing mortgage which would have needed a much higher percentage to be released than would have been possible...

MWT

DancingMan said:

I know some will say it is their doing so suck it up .... but they have paid money back, the issue is how much and without any intervention from the lender to deal with the capital.

The problem is they have not paid anything back, they have just paid the cost of borrowing with no capital repayments and from what you've said there were times when they didn't even fully pay the interest either...

As others have said, you need to get the whole story and map out the chain of borrowing and the amounts involved to determine how they got from the original mortgage to where they are now...

There is no hope of getting a lender to accept that as they have paid the interest they should get a reduction in the amount of capital still outstanding, so the only hope is that at some point since this all began, one of the lenders involved has made a mistake and left themselves liable in some way, but you can't begin to look for that until you have 100% of story clear...

Spendless

With you saying the initial mortgage was part/part. Does that mean they initially had an endowment  policy that was meant to pay off the mortgage? If so what happened to it? Both me and my now husband bought properties in the mid 90s. The endowment was with an insurance company. This was separate to the payments that we both paid to the mortgage provider. When we subsequently sold these properties and got a repayment mortgage instead for our current home, we continued to pay these endowment policies which years later paid out (a lot didn't pay out at the amount predicted when taken out)   Did your parents stop paying any such policy?

It does sound similar to the tangle my relative got themselves into, and from that experience I'm going to suggest you timeline it, what did your parents do at each step of the way (I've still no idea how my relative ended up with so much debt compared to what they bought their house out in the early 1980s!).

 

billy2shots

I am sorry if you felt my original  comment was judgmental,  but it's hard to see past the facts. 

- Parents bought their home for £11k in the nineties. Even when undoing house price inflation,  they got a good deal. 

No exploitation so far. 

-Although in a better position than many due to the above good deal, they get themselves into £60k of debt. 

Again , no exploitation so far. 

- Your parents leverage equity in their home to pay off debt. 

Nope, no exploitation again. In fact your parents have demonstrated the opposite of financial naivety that you are suggesting and have possibly consolidated higher interest debt into a more manageable mortgage. 

- Now things turn murky. How does £60k of part part debt turn into £150k. 

Being part part that £60k should be less today and even with agreed lower payments  when a parent was in hospital,  it is very hard to see how that £90k increase has materialised. 

It does look like they have taken out additional  finance and may not be painting the whole picture. 


Now this is where responsible lending might come into play. Without wishing to upset or anger you, your parents don't look like good candidates for accessing  increased finance. Whether  that's due to financial nativity which is what you are thinking or a conscious  decision to access cash with little regard to paying it back. The original £60k debt and the poor management  of the initial mortgage should have prevented lenders from agreeing to more lending. 

Exploitation now? Probably not, the banks don't want repossessions and want their money (and interest) back. I don't think they would have seen your parents as a cash cow but still shouldn't  have lent them further money. 

You as a child are trying to help but presumably you do not have an official governance over their finance. Presumably they retain capacity to make their own decisions as they have done all their lives?

You need to find out why they have this relationship with money. 
A history of wracking  up unpaid debts could continue long after this is resolved. 
Retirement could be a long time after all.