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The Preacherman

Cannot Repay Interest Only Mortgage At End

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I'm sure that we are likely to hear more stories like this one from MSE where people on IO mortgages face repossession and even bankruptcy when they can't repay the capital at the end of the term.

http://forums.moneysavingexpert.com/showthread.php?t=2626573

My friends have an interest only mortgage and are unable to repay the mortgage which is due to finish in a few weeks. They have not been able to find a mortgage with another company as so I am sure will be facing repossession.

Can anyone shed any light on this - they owe about 100,000 which they are unable to repay. I believe the loan was with Capital Home Loans, which are no longer lending (but have been taken over by Bank of Ireland.) They are under the impression that, as they have always paid and never had arrears, a judge would not grant a repossession order in this climate- would this be the case as they clearly owe the money?

Any ideas or input would be gratefully received!!!!

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surely it is legally binding that they should have had a repayment vehicle - they will have signed to agree this - so should they not be a little worried about going to court for fraud?

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I'm sure that we are likely to hear more stories like this one from MSE where people on IO mortgages face repossession and even bankruptcy when they can't repay the capital at the end of the term.

http://forums.moneysavingexpert.com/showthread.php?t=2626573

This story is going to repeat itself over and over again.

Plenty more where that came from.

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Its not just IO mortgages. Most current endownment policies also face a major shortfall of tens of thousands . Other vehicles used for capital repayment at the end of term such as isa,s and Peps are also miles off target. Only those with a straightforward repayment mortgage are relatively safe

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Guest DissipatedYouthIsValuable

It's the right thing to do to allow a bunch of dyscalculiate tossers to force opportunity costs on the rest of the population by price distortion for the next 20-30 years.

Edited by DissipatedYouthIsValuable

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It's the right thing to do to allow a bunch of dyscalculiate tossers to force opportunity costs on the rest of the population by price distortion for the next 20-30 years.

oooh - "dyscalculiate". My new favourite word (had to google it!)

HPC is such an education

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Does not compute

If it's the end of the mortgage term then they took it out in 1985 - that means that the house is worth waaaaaay more than the mortgage. Did they MEW it all away ?

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Does not compute

If it's the end of the mortgage term then they took it out in 1985 - that means that the house is worth waaaaaay more than the mortgage. Did they MEW it all away ?

Sounds like it.

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I guess many people with endowment and with-profits policies think they are OK and when they took these things out all they needed to do was pay the mortgage and then at the end the house would be theirs. With a nice cheque as well. I suspect many of these people never even think about the capital and act as if they have a standard re-payment mortgage.

Only if they never read their post

We have an endowment policy - the mortgage was paid off years ago - and the warning letters are getting increasingly hysterical.

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Sell the £ucking thing then....

Accrington £ucking Stanley. It's not rocket science, is it?

Edited by foxy

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If it's the end of the mortgage term then they took it out in 1985

No it doesn't. Lots of mortgages these days are short-term (2-5 years being common) with the expectation that you shop around to renew OR fall back to your lender's SVR.

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Does not compute

If it's the end of the mortgage term then they took it out in 1985 - that means that the house is worth waaaaaay more than the mortgage. Did they MEW it all away ?

Yes I thought it did not add up. Also back in 85 you still had to have a repayment or endowment or other way in place to pay off the mortgage . Did they have one of these and then cash it in when they were told that they could have IO with no method to repay the capital at the end.

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No it doesn't. Lots of mortgages these days are short-term (2-5 years being common) with the expectation that you shop around to renew OR fall back to your lender's SVR.

Then by your own reckoning they took it out in 85 , or they could fall back on the SVR now.

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Its not just IO mortgages. Most current endownment policies also face a major shortfall of tens of thousands . Other vehicles used for capital repayment at the end of term such as isa,s and Peps are also miles off target. Only those with a straightforward repayment mortgage are relatively safe

I sold my last place in London in 2001 having successfully nailed Legal and General for mis-selling.

My endowment plan, which was supposed to pay off the mortgage (£44k) :o and pay for a new car on maturity, :lol: wasnt even worth the contributions i had made in 6-7 years.This was my trigger (premature) to exit the London market. I did however buy a place for cash out of town in 2004.

Dont know how it took me so long to discover this site. B)

I currently rent a room off of a mate in Barnet when im at work in town , he has a mortgage with RBS for £144k :o:o:o and has no intention,mechanism, or hope of clearing it. Ever. Thankfully for him he didnt treat the place as a cash machine and make matters worse. I don't recall him ever having to provide evidence of a repayment plan either.

Life has been fairly nomadic, but ive saved hard. And i will sleep easy knowing there isnt a ticking time bomb strapped to my guts.

There are millions of people staring down this barrel.

MILIONS.

The banks are screwed. I dont know if they now it or not. I guess they do. <_<

Must buy gold soon.

Edited by shindigger

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I'm sure that we are likely to hear more stories like this one from MSE where people on IO mortgages face repossession and even bankruptcy when they can't repay the capital at the end of the term.

http://forums.moneysavingexpert.com/showthread.php?t=2626573

...probably investment vehicle failed...the lottery numbers failed to come up..... :rolleyes:

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I took out a mortgage in the late 90's and the broker was tied in with the developer. He was pushing endowments like crazy as the commission was much better on them than on repayments. I actually went into the meeting determined to get a repayment and came out with an endowment!- That's how great he made it sound.

Luckily for me I came to my senses in time and switched to a repayment- but I'm pretty sure that most the of that developments buyers went through this guy and a lot would have gone with endowment's on his say so- not realising that he had a real personal incentive to push them in the endowment direction. (As I later found out)

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I took out a mortgage in the late 90's and the broker was tied in with the developer. He was pushing endowments like crazy as the commission was much better on them than on repayments. I actually went into the meeting determined to get a repayment and came out with an endowment!- That's how great he made it sound.

You and me both. It's the equivalent of going to a timeshare presentation for the free buffet and ending up with 2 weeks a year of a villa in KIissemee. It took me a while to get out, but I did, just in the nick of time.

I didn't lose too much (if you ignore the opportunity cost) but I would have been far better off if I'd simply stuck the payments under the matress.

Lesson learned: "Advisor" = "Salesman"

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The pity with the endowments is that they did at one time pay out well. My dads paid out 3x the amount of the mortgage. Also he did not have a clue about what he had and one day this cheque came through the door for £12k , after paying off a £6k ten year mortgage.

But then the companies got greedy and started selling low start endowments , where you pay a small amount in for the first few years before the payments rise , well not enough was being put in in the early years so did not build up enough to give the payouts.

Some of the stories i have heard are really bad , after 16 years one couple i know had a projected pay out of £50k on a £105 mortgage with only 9 years left to make up the short fall.

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No it doesn't. Lots of mortgages these days are short-term (2-5 years being common) with the expectation that you shop around to renew OR fall back to your lender's SVR.

It's odd because that doesn't seem to be an option in this case ... the principle has to be repaid. Seems fishy to me; on the face of it I'd expect a non-repayment mortgage old enough to have reached the end of its term, to be an endowment mortgage.

As far as I'm aware, modern IO mortgages in the UK -- with an implicit repayment vehicle funded by HPI -- were not developed until after Gordon had abolished boom and bust.

Edited by huw

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I guess many people with endowment and with-profits policies think they are OK and when they took these things out all they needed to do was pay the mortgage and then at the end the house would be theirs. With a nice cheque as well. I suspect many of these people never even think about the capital and act as if they have a standard re-payment mortgage.

I took out an endowment policy in 1989 for £27 000, paying just over £33 per month for 25 years. I remember the 'Financial Adviser' telling me enthusiastically that not only would it pay off the mortgage but I would be left with '£2000 to £3 000 left over.

The policy matures in 2014 and according to my last statement from Standard Life it will be worth about £14K....a shortfall of £13K on the mortgage. As it happens I have paid my mortgage off so I don't need it but these things really were a complete con.

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I took out an endowment policy in 1989 for £27 000, paying just over £33 per month for 25 years. I remember the 'Financial Adviser' telling me enthusiastically that not only would it pay off the mortgage but I would be left with '£2000 to £3 000 left over.

The policy matures in 2014 and according to my last statement from Standard Life it will be worth about £14K....a shortfall of £13K on the mortgage. As it happens I have paid my mortgage off so I don't need it but these things really were a complete con.

Yep, the psychology of the market was such that everbody wanted a piece of the stockmarket action from the late 80s through to the mid 90s because it continuously went up 15% per annum and projections naturally carried on this rate of increase into the future, Then of course after a couple of years when everyone had been hooked in a blow off frenzy (known as the tech boom where people bought complete sh¦t at silly prices, companies dont need to actually make profits anymore) its been going down ever since. Naturally when everyone should have been piling into endowments in the late 70s, nobody would have touched them with a bargepole

But houseprices and the psychology of everyone wanting houses because they will always go up by 10% per annum because thats what theyve done the last 50 years due to expanding credit is completely different (and again a blow off top known as the BTL slavebox boom where people bought complete sh¦t at silly prices, Rent doesnt need to cover interest anymore) and if for instance they were to fall 50% from here then you can guarantee nobody will want to buy one with a bargepole because if they got there and it proved to be the bottom the pessimism would be such that practically noone would buy because they wouldnt be able to comprehend them not dropping another 50%, the same psychological comprehension that makes it impossible to envisage 50% falls at the top

facepalm.jpg

Edited by Tamara De Lempicka

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Does anyone know in which year the IO mortgage began? I think it was about 15 years ago. Assuming most were taken out on a 25 year plan I was just wondering in what year the SHTF big time.

Yet another timebomb ticking away.

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  • 143 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • up 5%



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