Guest Posted February 13, 2015 Share Posted February 13, 2015 I've been offered a BOMAD loan ... yet to discuss specifics, but I'm trying to get my head round whether it would actually help. Ignoring the fact that they could ask for the money back at any time (unlikely, but say they needed care, or passed away and a solicitor starts sniffing around), I don't want to take on extra debt over and above my mortgage (say 25 year loan of 4 x salary), so this loan would simply replace an element of my mortgage. Say I was going to borrow £150k from the bank, plus £50k deposit. Being offered a BOMAD loan of £25k, interest free, over 10 years doesn't seem to help much and just adds another layer of stress/complexity. Plus, you know, I just don't want to be in their pocket. Especially the new partner of the in-law offering us the loan - she is very "ooo we shop in waitrose, and pay for our m&s bank account, and buy every Apple product going because they are good aren't they.... and went out and bought a new car on a whim, but not the one I wanted because the colour I like was only on the other model". FFS. Sorry, a bit of a lack-of-sleep rant.... but anyway.... yeah, does a BOMAD loan really help? Quote Link to comment Share on other sites More sharing options...
StainlessSteelCat Posted February 13, 2015 Share Posted February 13, 2015 Never been in the position to take one, but surely depends on the terms? I suspect many BOMAD loans actually turn out to be gifts, or at least made on terms which mean it might as well be (pay us back when you can). Personally, a loan from the new partner of a parent would send me running for the hills. What happens if they split? The problem, of course, is that they allow most people who access them to pay more for housing because they are rarely used like yours might be. Quote Link to comment Share on other sites More sharing options...
Digsby Posted February 13, 2015 Share Posted February 13, 2015 If youre going to have the mortgage anyway, and its interest free, you may as well. The best way to do it may be with an offset mortgage, so your interest is on £25k less but you can hand it back anytime. Obviously fees, rates etc might be different so need to be considered, I'm not a financial advisor. Quote Link to comment Share on other sites More sharing options...
Si1 Posted February 13, 2015 Share Posted February 13, 2015 The control thing would worry me Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 13, 2015 Share Posted February 13, 2015 Im not sure how current this is, but there are issues with offset mortgages in this dogy climate: Payout arrangements from 1 January 2011From 1 January 2011, set off is no longer being applied by the FSCS. This means if a depositor owes a bank money, the debt is no longer set off against the positive balance when calculating the amount of the protected deposit. Instead the Scheme pays compensation as a gross payout up to the limit of £85,000. Removing set off is designed to help speed up payment and ensure that eligible depositors do not lose liquidity in the event of a default. Negative balances such as overdrafts, credit cards and certain types of “off set” mortgage accounts (where the savings and loan elements cannot be separated) are now excluded by the FSCS. However, under insolvency law, the remaining deposit balance, anything over £85,000, is automatically set-off against any debts in the liquidation, meaning consumers debts will be reduced by that excess amount. How are offset mortgages dealt with? If a deposit account is separate from the mortgage balance, it would be dealt with separately and compensation would be calculated on a gross basis. However, if the deposit account is combined with the mortgage account and operated as one large overdraft, the FSCS would have to treat it as an overdraft and no compensation would be payable. It is important that consumers appreciate the difference between these accounts.If the accounts are separate the FSCS would pay compensation up to the limit and the remainder would automatically be set-off against the debt (or in this case mortgage) under insolvency law. Quote Link to comment Share on other sites More sharing options...
Samboy Posted February 13, 2015 Share Posted February 13, 2015 Surely it depends on your local property market. If you live in London or the Se its best to wait imho. Quote Link to comment Share on other sites More sharing options...
ccc Posted February 13, 2015 Share Posted February 13, 2015 OK I will come out with what everyone else is thinking but are too polite to say. How old are they ? Quote Link to comment Share on other sites More sharing options...
Digsby Posted February 13, 2015 Share Posted February 13, 2015 (edited) Thanks Bloo, so if I'm reading that right, you'd loose your deposit, or the 1st £85k of it, entirely? That can't be right, or are they saying that you would receive nothing but your debt would be reduced by the full deposit amount? Edited February 13, 2015 by Digsby Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 13, 2015 Share Posted February 13, 2015 New partner of partner. Sounds like an insecured loan. 25% of UK women are taking medication for some form of mental illness, depression, anxiety, Bi-whatever disorder. That means that 75% are NOT receiving their treatment...something should be done Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted February 13, 2015 Share Posted February 13, 2015 Thanks Bloo, so if I'm reading that right, you'd loose your deposit, or the 1st £85k of it, entirely? That can't be right, or are they saying that you would receive nothing but your debt would be reduced by the full deposit amount? Offset was always a problem for them. Until a bank fails, I guess we'll never know. Quote Link to comment Share on other sites More sharing options...
Wurzel Of Highbridge Posted February 13, 2015 Share Posted February 13, 2015 It might buy you a house that's 10m2 larger than you could have otherwise afforded. Do you really need the extra debt more than the extra space? Quote Link to comment Share on other sites More sharing options...
Digsby Posted February 13, 2015 Share Posted February 13, 2015 Offset was always a problem for them. Until a bank fails, I guess we'll never know. It seems to imply that there are two types of offset mortgage, one where the accounts are linked and one where they are separate. I'll make an enquiry as this could be a deal breaker in my own future plans. Thanks again. Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted February 13, 2015 Share Posted February 13, 2015 Maybe this wil help you decide: http://en.wikipedia.org/wiki/Ponzi_scheme " Ponzi schemes can survive simply by persuading most existing participants to reinvest their money, with a relatively small number of new participants." The only people the BOMADs are helping are themselves. Just say NO to debt Quote Link to comment Share on other sites More sharing options...
Craig_ Posted February 13, 2015 Share Posted February 13, 2015 Take the money then bury them under the patio! Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted February 13, 2015 Share Posted February 13, 2015 Take the money then bury them under the patio! That's a bit harsh just because they are pushing a ponzi scheme onto their child. If the BOMAD "invest" in their childs future by helping them by a house, are the then double levered ? If you think the market will collapse then wouldnt it be better just to have your parents loose money and not you both ? If your parents own a house and you will inherit it then you are effectively on the housing pyramid, so why bother being stuck with a massive weight round your neck. The BOMADs are not doing their children any favours keeping this scam going, because of the leverage effect they are throwing more of their children's inheritance away. Who'd a thunk it. Quote Link to comment Share on other sites More sharing options...
Guest Posted February 13, 2015 Share Posted February 13, 2015 Never been in the position to take one, but surely depends on the terms? It would be interest free, over a duration of my choosing, but my concern is if their situation changes they could call in the loan. If youre going to have the mortgage anyway, and its interest free, you may as well. Yeah ... it's just whether the small amount of interest it saves me is worth the stress. Surely it depends on your local property market. If you live in London or the Se its best to wait imho. South East.... OK I will come out with what everyone else is thinking but are too polite to say. How old are they ? Mid sixties It might buy you a house that's 10m2 larger than you could have otherwise afforded. Do you really need the extra debt more than the extra space? It would allow us to buy a 3 bed semi now, rather than wait for prices to drop by £50k (20%). But you're right - I would want the BOMAD debt instead of a proportion of the mortgage debt, not in addition to. However the BOMAD think we should have it on top..... taking our debt to 5 times income. Quote Link to comment Share on other sites More sharing options...
long time lurking Posted February 13, 2015 Share Posted February 13, 2015 The control thing would worry me After all i done for you Quote Link to comment Share on other sites More sharing options...
R K Posted February 13, 2015 Share Posted February 13, 2015 the in-law offering us the loan make sure it is in-law offerin your partner the loan. In case you split. So its not your responsibility to repay. Quote Link to comment Share on other sites More sharing options...
bankstersparadise Posted February 13, 2015 Share Posted February 13, 2015 make sure it is in-law offerin your partner the loan. In case you split. So its not your responsibility to repay. My experience of these things is that you need to have a very grown-up discussion and document everything very clearly. I tired to have a similar grown up discussion with my in-laws once and it didn't go so well. Wife was happy that I humored them though. Quote Link to comment Share on other sites More sharing options...
Si1 Posted February 13, 2015 Share Posted February 13, 2015 It would be interest free, over a duration of my choosing, but my concern is if their situation changes they could call in the loan. Yeah ... it's just whether the small amount of interest it saves me is worth the stress. South East.... Mid sixties It would allow us to buy a 3 bed semi now, rather than wait for prices to drop by £50k (20%). But you're right - I would want the BOMAD debt instead of a proportion of the mortgage debt, not in addition to. However the BOMAD think we should have it on top..... taking our debt to 5 times income. A lot of oldies biggest financial regret is not having bought a bigger house. Perhaps they are viewing it as an investment. I would hate to be embroiled with their cognitive dissonance when it all went pear shaped though. Quote Link to comment Share on other sites More sharing options...
SarahBell Posted February 13, 2015 Share Posted February 13, 2015 Tell them it's not enough! Quote Link to comment Share on other sites More sharing options...
Guest Posted February 17, 2015 Share Posted February 17, 2015 Well, I've costed it out.... £50k over 10 years, interest free is £400 pm. However, that would be on top of a £150k mortgage at £750 ish per month. That would leave us over-leveraged, with not a huge amount spare at the end of each month (£400 after all bills, food and xmas/car/hols put aside). It might sound a lot, but I'd like more wriggle room than that with 2 young kids and ever present threat of job loss etc. I've declined the offer,and highlighted the fact that in 1977 average houses were 4 x average salary, but now they are 8 x. This bubble has to pop. Luckily my wife was even more concerned than I was upon seeing the repayments... god love 'er. Quote Link to comment Share on other sites More sharing options...
gilf Posted February 17, 2015 Share Posted February 17, 2015 Well, I've costed it out.... £50k over 10 years, interest free is £400 pm. However, that would be on top of a £150k mortgage at £750 ish per month. That would leave us over-leveraged, with not a huge amount spare at the end of each month (£400 after all bills, food and xmas/car/hols put aside). It might sound a lot, but I'd like more wriggle room than that with 2 young kids and ever present threat of job loss etc. I've declined the offer,and highlighted the fact that in 1977 average houses were 4 x average salary, but now they are 8 x. This bubble has to pop. Luckily my wife was even more concerned than I was upon seeing the repayments... god love 'er. Only you know them, I would have no issue taking something from my parents for example as I have known them all my life, know their ethics and would be very comfortable that they would be doing so for my benefit and wouldn't do so if it meant they were less secure in the process. The fact it's a loan and they want it back with regular payments would be the issue for me. I'm not saying they shouldn't expect it back but the you never know what's around the corner and the fact they are expecting it back means they can see a time when it will be required. Personally I think you have made the right choice. Quote Link to comment Share on other sites More sharing options...
Stu007 Posted February 17, 2015 Share Posted February 17, 2015 Will mortgage companies even allow you to use a 'loan' from Bomad? I'd have thought the mortgage company would want it in writing from them that it was a gift. Quote Link to comment Share on other sites More sharing options...
Guest Posted February 18, 2015 Share Posted February 18, 2015 Will mortgage companies even allow you to use a 'loan' from Bomad? I'd have thought the mortgage company would want it in writing from them that it was a gift. Just what occurred to me yesterday... If its a loan then that is taken into account for the affordability of the mortgage. If I say it is a gift that is mortgage fraud. Quote Link to comment Share on other sites More sharing options...
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