Interest only mortgage mistake by Mortgage Company?

Hello, I have a mortgage with a popular mortgage company, LTV is currently 35%, I have 65% equity. When it was time to mortgaged, I applied for interest only, unfortunately I was rejected due to my age & low income as I am now semi retired. When the government charter came in, I applied and got approved for interest only for 6 month only. I was sent letters confirming everything. Recently, 2 months into the interest only, I received a letter from the mortgage company confirming that my mortgage is on an interest only and I should confirm how I will repay the outstanding balance when it matures. Stating that their records indicate as of October that I am on an interest only mortgage with a balance of XXXX loan, and an expiry date of XXXX (full loan duration). I complete the form and sent back confirming that I will downsize at the loan expiry date to pay the mortgage balance. I have not heard back since I sent the letter. I am not sure if this is a mistake from the mortgage company. If it is, can I make them honour the interest only for the whole duration of the term?

Comments

  • Are they asking how you will repay the additional money you owe, from the repayment mortgage? 6 months of interest only still requires you to pay the shortfall at the end of the 6 months.
    It's probably best you call the company. I would be surprised if you are on actual interest only, more likely they have made a mistake.
  • MWT
    MWT Posts: 9,127
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    Recently, 2 months into the interest only, I received a letter from the mortgage company confirming that my mortgage is on an interest only and I should confirm how I will repay the outstanding balance when it matures. Stating that their records indicate as of October that I am on an interest only mortgage with a balance of XXXX loan, and an expiry date of XXXX (full loan duration). I complete the form and sent back confirming that I will downsize at the loan expiry date to pay the mortgage balance. I have not heard back since I sent the letter. I am not sure if this is a mistake from the mortgage company. If it is, can I make them honour the interest only for the whole duration of the term?
    It is likely that the letter was triggered by their standard systems that may not have been updated yet to recognise the difference between this new type of temporary interest only period and the full term on interest only, but that doesn't mean you are in any way entitled to stay on the IO basis longer than 6 months.
    I would expect the interest only period to end on schedule, have they discussed with you what happens at that point?
    Either you will need to pay the missing capital reduction amount due over the 6 months, or your future repayments will be increased to ensure you stay within the original term.

  • dunstonh
    dunstonh Posts: 115,706
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    Lenders send out warning letters for those on interest only periodically.    On the one hand it reminds people that they have to have the means to repay the mortgage on the redemption date.   On the other hand, it prevents the lender from complaints/claims that the borrower was missold their mortgage.

    If you are temporarily on interest only then its likely that the automated letter release system wouldn't know its temporary.  It just sees interest only and issues the interest only warning letter.


    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • ACG
    ACG Posts: 23,621
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    You are on interest only for 6 months. Unless they up the repayments at the end of the 6 months to counter the interest only period you are going to get to the end of the mortgage and have a balance outstanding. 
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Hoenir
    Hoenir Posts: 1,247
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     I have not heard back since I sent the letter. I am not sure if this is a mistake from the mortgage company. If it is, can I make them honour the interest only for the whole duration of the term?
    In 4 months time you will revert back to your original terms. With then 6 months less to repay the capital balance owed.
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