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Given Up

High Street Banl No Longer Accepts Property Value As A Repayment For I O Mortgage

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I was trying to fix up a mortgage and was discussing different options with a high street bank (begins with N and ends in T)

Discussed I O versus repayment. Was told that an IO mortgage has to have an alternative repayment vehicle (eg an endowment) I said - but surely the property will cover the mortgage and they said no. They no longer accept the property value as a repayment vehicle! This is on borrowing 70% of the property value.

So - what do you make of that?

Edited by Given Up

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They cover short term risk.

If you go in default on say £100K mortgage (property worth £120K), then it will take them about 6 months to get you to a court - so they lose about £3K in interest. Add in about £2K of costs to get there and enforcement and that's the property value down to £115K. Take off a 20% discount for it being a repo and no doubt been stripped bare by the mortgagee and it's got to be worth no more than £92K. 70% of £120K is £84K, so they are only allowing the risk of say 7% reduction in market prices....... - not much more..

Not unreasonable and I should say prudent in my book.

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Would suggest that this is an important example of credit tightening.

You may like to add it to DrBubb's pinned Credit Tightening thread.

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I thought they always paid lip service to this - they say you have to have a repayment vehicle, and you say fine. But they don't actually do anything to monitor or check that you have done so, and actively avoid taking responsibility for any problems that will ensue if you don't.

It's not that they aren't accepting the property value as a guarantee, where they were before (I wish it was...). It's just that they can't openly admit that they don't care about your repayment vehicle.

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Would suggest that this is an important example of credit tightening.

You may like to add it to DrBubb's pinned Credit Tightening thread.

Thanks - have added it there

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I thought they always paid lip service to this - they say you have to have a repayment vehicle, and you say fine. But they don't actually do anything to monitor or check that you have done so, and actively avoid taking responsibility for any problems that will ensue if you don't.

It's not that they aren't accepting the property value as a guarantee, where they were before (I wish it was...). It's just that they can't openly admit that they don't care about your repayment vehicle.

Good point Magpie!

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I thought they always paid lip service to this - they say you have to have a repayment vehicle, and you say fine. But they don't actually do anything to monitor or check that you have done so, and actively avoid taking responsibility for any problems that will ensue if you don't.

It's not that they aren't accepting the property value as a guarantee, where they were before (I wish it was...). It's just that they can't openly admit that they don't care about your repayment vehicle.

Maybe but I have never heard it before and she went on at length.

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Maybe but I have never heard it before and she went on at length.

Maybe that's because you were openly saying that you might not get (or didn't see the need for) a repayment vehicle. A lot of people take out IO mortgages without a repayment vehicle, with the bank turning a blind eye. But even now we all know that the banks have to act as though it's not true.

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  • 301 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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