Jump to content
House Price Crash Forum

Recommended Posts

Let me re-write that story for you.

LLoyds is offering a 100% mortgage to get a its name in the papers for free - Look we still do stuff!!! We've not totally gone bust.

 

Lets look for the catch

Purchasers need no deposit if family can back the loan by moving 10% of price into bank’s saver account

Oh ... so not 100% then.

Now lets look a tthe detail. Devils alwsy there you know.

https://www.lloydsbank.com/mortgages/offers/lend-a-hand.asp

Lend a Hand mortgage

The Lend a Hand scheme is now closed.

 

Share this post


Link to post
Share on other sites

What happens if the borrower doesn't pay the mortgage or declares themself bankrupt?  If the saver's deposit gets seized in this situation then this is exactly the same as one person lending to another, so they may as well just do this and probably get more competitive rates.

Similarly, I assume the one with the savings account can't withdraw it if they need the money.

I guess they're hoping that the one with a "savings" account doesn't bother reading the smallprint.

It's just a dressed up version of borrowing the deposit from someone else.

Share this post


Link to post
Share on other sites
46 minutes ago, Tes Tickle said:

What happens if the borrower doesn't pay the mortgage or declares themself bankrupt?  If the saver's deposit gets seized in this situation then this is exactly the same as one person lending to another, so they may as well just do this and probably get more competitive rates.

Similarly, I assume the one with the savings account can't withdraw it if they need the money.

I guess they're hoping that the one with a "savings" account doesn't bother reading the smallprint.

It's just a dressed up version of borrowing the deposit from someone else.

For the family member(s) putting up 10% - 

  • Your savings will be used as security, in case the buyer misses any mortgage payments.
  • You legally can’t take out your savings for 3 years which means this account cannot be closed early. If the buyer misses any mortgage payments, we will take this from your savings. That means you may get back less than you put in.
  • At the end of the 3 years, you will be able to take out your savings plus interest. That’s as long as the buyer hasn’t missed any payments or their home hasn’t been repossessed.
  • If the buyer is behind on their payments in the final 6 months, the savings must stay in the account for longer. You can only take out your savings when the mortgage payments are up to date for 6 months.
  • We recommend that you obtain independent legal advice. That’s why we give you £300 towards this.

Share this post


Link to post
Share on other sites

Thanks - that actually makes sense.  It looks like the bank are assuming that the worst case is that the house will be worth 10% more after three years, after which the borrower will have (roughly) 90% LTV.

All super, provided prices only ever go up...

Share this post


Link to post
Share on other sites
2 minutes ago, Tes Tickle said:

Thanks - that actually makes sense.  It looks like the bank are assuming that the worst case is that the house will be worth 10% more after three years, after which the borrower will have (roughly) 90% LTV.

All super, provided prices only ever go up...

They will only go up in price if enough people take them up on their generous offer of a 100% mortgage......;)

Share this post


Link to post
Share on other sites
1 minute ago, spyguy said:

I has the smell of an Amigo Loan about.

 

Not a friend but your parents......if you don't pay your parents will, they can afford it.;)

Share this post


Link to post
Share on other sites
14 minutes ago, Tes Tickle said:

Thanks - that actually makes sense.  It looks like the bank are assuming that the worst case is that the house will be worth 10% more after three years, after which the borrower will have (roughly) 90% LTV.

All super, provided prices only ever go up...

Does it not have to be a Capital & Interest Mortgage? Then after 3 years at least some of the capital has been paid.

Doesn't change your point that the banks continue to bet that house prices will rise. If they fall bu anywhere near 10% then the capital portion of the repayments gets basically wiped out (in terms of options for different style of mortgage).

Share this post


Link to post
Share on other sites

The capital repayment after 3 years would be pretty slim, I'm guessing somewhere around 5%.  Repayment mortgages are mostly interest at the start, the proportion that pays off the capital increases through the term, as the amount that the interest is charged upon naturally diminishes every month.

If prices merely stand still then it's likely that the bank would be more than 90% exposed after 3 years.  E.g....

capita3.gif

Share this post


Link to post
Share on other sites

in the "For The Family Member" bit of the t&Cs

Quote

Keep in mind

  • Your savings will be used as security, in case the buyer misses any mortgage payments.
  • You legally can’t take out your savings for 3 years which means this account cannot be closed early. If the buyer misses any mortgage payments, we will take this from your savings. That means you may get back less than you put in.
  • At the end of the 3 years, you will be able to take out your savings plus interest. That’s as long as the buyer hasn’t missed any payments or their home hasn’t been repossessed.
  • If the buyer is behind on their payments in the final 6 months, the savings must stay in the account for longer. You can only take out your savings when the mortgage payments are up to date for 6 months.
  • We recommend that you obtain independent legal advice. That’s why we give you £300 towards this.
  • Interest rates correct as at 28/01/2019.

 

Share this post


Link to post
Share on other sites
4 minutes ago, stuckmojo said:

Nice way to make family members liable too. 

There is a further stipulation too that the 'close family member' must be:

Quote

someone who is related to at least one of the applicants by birth or blood, or by marriage or civil partnership (including stepchildren, adopted children and in-laws).

If Lloyds are gonna lose out then your nearest are dearest are too :D 

Share this post


Link to post
Share on other sites
43 minutes ago, Tes Tickle said:

The capital repayment after 3 years would be pretty slim, I'm guessing somewhere around 5%.  Repayment mortgages are mostly interest at the start, the proportion that pays off the capital increases through the term, as the amount that the interest is charged upon naturally diminishes every month.

If prices merely stand still then it's likely that the bank would be more than 90% exposed after 3 years.  E.g....

capita3.gif

Surely when interest rates are lower then the capital portion of the first payment is proportionately higher? #notShowingMyWorkingIsBadIdea

Share this post


Link to post
Share on other sites
2 hours ago, Aidan Ap Word said:

Surely when interest rates are lower then the capital portion of the first payment is proportionately higher? #notShowingMyWorkingIsBadIdea

This is true, for a real life example I took a 20 year £312k repayment mortgage @ 2.2% in August 2016.  Mortgage payments are roughly £1600 pcm. 

On our 2018 statement to December 2018 we now owe £282k.  So £30k capital has come off in 28 months which is an average of £1072 capital repaid every month out of the £1600.  

Gotta low low IR. And now on a 2.29% fix until 2023 to insulate against any Brexit huge IR rises.

 

 

Share this post


Link to post
Share on other sites
14 minutes ago, Now or never said:

Don’t think this changes anything, MMR is the real hurdle not a 5% deposit; removing the deposit may quicken the process for a few but not a market changer.

MMR is tricky but you can get round it mostly, we did, you just need to live like hermits for 2 years, clear all unsecured debts, and develop a healthy monthly cash surplus which you can either save as cash or over pay the mortgage. 

Once you get the new mortgage you return to holidays abroad and borrowing for things and if you did paying back your family the cash you borrowed to clear your unsecured debts etc.

For MMR to be really effective it would have to be reviewed annually after a mortgage is granted and penaltys applied if you couldn't pass it. 

We got through MMR with undisclosed private school fees that go through a separate bank account funded by Grandad. As it actually wasn't a direct cost to us and it doesn't show on any credit check as its private family finance we didn't mention it.

For example , before MMR application in 2016 I drove a 2012 car on a loan. I made sure the loan was clear by early 2016 and so the car loan was gone, not a liability for MMR to push against. Once we got the mortgage Q3 2016 and moved in, come March 2017 went straight into a 4 year PCP for a BMW i3 Rex costing £465 pcm!!! Had I had the PCP in 2016 mortage we took on would have never been approved. Personal Family financial engineering.

MMR is easy if you are good at financial  planning and engineering. But the basic idea is good, even after any financial engineering if you cant afford the mortgage payments and basically live, you cant afford it.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 294 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.