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redprince

Thoughts On This Please

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Right, i just want to state from the beginning that this story does not add up to me but i would appreciate any views on it.

Was talking to a mate on Saturday and he told me of a young chap who had owned a property for about three years and had never missed a payment on his mortgage -(even showed him the statements appaerently).Anyway the bank have been in touch to tell the fellow that his house is in their view sitting in £80k negative equity.They have requested that he is to pay them this amount to make up the shortfall!!!!!

I told my mate that they cannot do this.His view was same but thinks the bank (dont know which one) is simply desperate for cash and is trying it on!

Anyone heard anything similar?

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Right, i just want to state from the beginning that this story does not add up to me but i would appreciate any views on it.

Was talking to a mate on Saturday and he told me of a young chap who had owned a property for about three years and had never missed a payment on his mortgage -(even showed him the statements appaerently).Anyway the bank have been in touch to tell the fellow that his house is in their view sitting in £80k negative equity.They have requested that he is to pay them this amount to make up the shortfall!!!!!

I told my mate that they cannot do this.His view was same but thinks the bank (dont know which one) is simply desperate for cash and is trying it on!

Anyone heard anything similar?

Very highly unlikely to be true. There’s just no up short for he bank in this situation unless of course he’s sitting on saving with the same bank which they expect him to pay off the negative equity. If the above case is true and savings are available I wouldn’t be surprised if a bank like First Trust or BOI would ask for a payment of the capital particularly if the mortgage is on a very low base rate tracker on interest only.

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It's what you call a "margin call" and I think this is in the small print of all mortgages. This could easily happen if it was a subprime mortgage originally - 100% or more.

However it is usually only BTL mortgages that this is called on since they are regarded as commercial.

I believe it is possibly true but not common as such - but may become more common in the future.

Thanks guys - interesting all the same.If i hear any more details about this i will post it up here.

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If it is true, do the bank seriously expect the bloke to have 80k to pay off the balance? What if he hasn't, or just calls their bluff and doesn't pay? Surely they'd be shooting themselves in the foot if the then went ahead and tried to repossess the property, because they'd never sell it for a price that would make up for the capital loss, leaving them even more in the red.

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If it is true, do the bank seriously expect the bloke to have 80k to pay off the balance? What if he hasn't, or just calls their bluff and doesn't pay? Surely they'd be shooting themselves in the foot if the then went ahead and tried to repossess the property, because they'd never sell it for a price that would make up for the capital loss, leaving them even more in the red.

Is it possible he's on an Interest only Mortgage ? I've heard of banks writing to people to ask them to switch to repayment recently as they where in negative equity.. Is it possible that's what they where asking rather than paying 80k in one go ?

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Tangent - great to see some new posters on this thread - has anyone else noticed a sharp uptick in comments from new members recently?

I must admit that for me, as a new member making my first tentative post today, seeing the length of membership and number of posts of some members is a bit daunting, makes you feel a bit like the new kid at school! So, glad to know our contribution is appreciated. Thanks.

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Is it possible he's on an Interest only Mortgage ? I've heard of banks writing to people to ask them to switch to repayment recently as they where in negative equity.. Is it possible that's what they where asking rather than paying 80k in one go ?

Read the small print.

A normal loan with the bank would be at their discretion and they often review it on an annual basis.

A mortgage is different in the sense that you have an agreement to pay down the loan over a certain term.

Now, If you have an interest only base rate +0.5% deal with the bank you can bet that the bank are looking very closely at the small print, even if you are not! It could be that you must be able to demonstrate that the value of the mortgaged asset is within a % of the outstanding loan amount, irrespective of the interest payments that you make.

The concern for the bank might be the following;

In 2009, Lend an eejit £150k interest only base rate tracker on a 15yr BTL deal.

The property is now worth £70k with 12 years to go on the mortgage. The banks get very nervous with this sort of thing. It's a bit like having a £20k overdraft and always being £19k overdrawn....I'd say the nudge from the bank is to force the property owner to re-mortgage into a repayment type deal - pay us £80k or go onto our SVR deal.

It would be much worse if said eejit re-mortgaged in 2007 for £200k to leverage the purchase of another few houses on the same type of deal. Still not sure who it would be worse for ;-)

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Like others have said I see no reason why the bank can not do this? If you are no longer within your agreed LTV then then the bank can probably do as they please regardless of whether you have missed a payment or not as you are no longer within your agreed mortgage terms.

It is their property until the final payment is made.

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Right, i just want to state from the beginning that this story does not add up to me but i would appreciate any views on it.

Was talking to a mate on Saturday and he told me of a young chap who had owned a property for about three years and had never missed a payment on his mortgage -(even showed him the statements appaerently).Anyway the bank have been in touch to tell the fellow that his house is in their view sitting in £80k negative equity.They have requested that he is to pay them this amount to make up the shortfall!!!!!

I told my mate that they cannot do this.His view was same but thinks the bank (dont know which one) is simply desperate for cash and is trying it on!

Anyone heard anything similar?

To quote your own point ... this story does not add up

Unlikely to be true. Sounds a bit like chinese whispers to me.

If this person has never missed a payment then it makes no sense that a Bank would issue a formal demand for payment of negative equity. It just doesnt make business sense. The Bank should/would only be issuing demands in cases whereby arrears are evident.

Property was used as security for all sorts of loans over the past few years and what you could find is that this person took out some sort of business loan and has defaulted on the payments therefore the bank is issuing a demand for that ... there are so many different scenarios that would make more sense.

But then again who knows ... ???

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Tangent - great to see some new posters on this thread - has anyone else noticed a sharp uptick in comments from new members recently?

all new posters very welcome ... !!

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I could see it happening if the person was in negative equity, on interest only but had saving e.g. an ISA with the same institution. I'm sure lots of the Irish banking institutions are looking at ways to reduce their property exposure risk.

I have another interesting story I heard from a family member at the weekend. (I'm still trying to workout how truthful they were being though I have no reason to doubt then). Basically this cousin (2nd) lost there father a number of months ago and had been going through probate. They turned up several thousand pounds (very wealthy family unlike mine) in an account they had no idea their father had. They were looking to remove the money from this Irish institution and we offer all manner of incentives to keep it there. They we offered the chance to invest the money in property they had repossessed at knock down prices. So maybe there is a fire sale going on.

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Still surely if they want to they can do it regardless of what other factors may or may not be behind this.

Talking purely hypothetically in theory is there any reason they can not do this?

The property no longer falls within their agreed mortgage terms (no longer within the LTV) and so the bank if they chose to could ask for the other 80k or force a sale and suffer whatever losses they want now. Was the OP not wrong in saying the bank CANT do this?

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  • 331 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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