General Chat

Lynda, yes of course each circumstance in taking out an interest only mortgage is different, I took out one myself...but it's a given surely that somewhere along the line it has to be paid...and that is seemingly what some people didn't understand?

Or maybe I'm reading it wrong... perhaps so? I just can't see how anyone would NOT know that it had to be repaid, whatever choice they made as to the mortgage itself, and whether it was falsely made out to be a good idea when in fact it wasn't.

I'm not having a go at anyone, I just simply don't understand how people could think it wouldn't have to be paid. 'sometime. somehow'. and that was what I assume from the quote.

It will come as a huge shock to many of course because a lot of people thought that house prices would continue to go up, or remain stable at least and that's not been the case. I have friends who will be in dire straits if house prices don't recover so I am really not knocking anyone. You make the best choice you can with what you've got at the time . ( or the worst choice sometimes as I sadly know!).

Lynda, being mis-sold a mortgage is one thing but not understanding that interest only could mean anything other than "interest only" is something else,

it's for you to decide which fits your circumstances

Roy

Gins, I concede your younger and a whole lot prettier but if you took out an endowment mortgage in 1997 :-0 then what drugs where you on :-P ;-) <3

Robert, my experience of the Insurance/assurance market

I did a course sponsored by a large company (i will not name them) but they no longer exists and qualified as a financial advisor but I must add I have never actualy worked professionally in the industry because having done the course my opinion then was that the financial industries in this country were corrupt and so decided it was not for me and that was in the 1980's

So time has passed and not every thing is the same today and then we all forget over time but i think everything i said is still correct but i am open to being told im mistaken on some points

Roy

How wonderful to read you think me stupid Roy, not knowing the circumstances as to why I think I was mis-sold my mortgage.

Rose, I DO realise, but again without knowing everyone circumstances you don't know as to why 65, 000 people have got a shock coming.

Roy

My first mortgage (For 'my' home) was 1997 It stands as I said, house paid in full on death, with a 'payment of £xxx on top

I'm much younger than you :-P .....and prettier

;-) <3

Roy, What is your experience of the Insurance market?

Gins If you still have the papers check what it actualy says with reference to insurance v assurance they are not the same thing people have confused these two terms for years

the government guarantee that you would get back a minimum equal to the amount you had paid in, I think came in late 70s or early 80's because of the insurance companies going bust and leaving people in debt

If you are paying interest only then the house belongs to the mortgage provider until you pay the loan off, That has always been the case if your assurance "sum assured" covers that then you can pay the mortgage off if it doesn't then you cannot,

For info on insurance v assurance see this link below but bear in mind we are talking about the situation several years ago with regard to endowment mortgages


http://www.life-assurance-bureau.co.uk/life-insurance/faqs/what-is-the-difference-between-life-assurance-and-life-insurance-li.htm

Roy

added "sum assured" is directly linked to how your investment is doing so if your investment is under performing then you are stuffed

I agree with Robert. We had an endowment, with profits, policy and the whole point was that, if you died, the policy matured, the mortgage was paid off and the widow/children were not left homeless.

Roy

My first endowment mortgage paid upon death:

The settlement on the house and £xxxx life insurance

Robert, What part of my post do you refer to?

Roy

No, Roy that is not how it worked.

The only legal protection you had with an endowment was that a government guarantee that you would get back a minimum equal to the amount you had paid in

If you died mid term then the house became the property of the mortgage lender and the insurance part of the endowment gave a minimum sum assured on your death

Roy

Robert. Endowment policies were years ago. In recent years you have often had a choice to pay interest only or repayment. If you opt for interest only, you only need to say that you expect to be able to pay the amount of the loan back.

No one asks you how. Bit like these balloon payments after 4 years of buying a car on HP. Who can easily lay their hands on the balloon payment?

the dreaded credit card works much the same......its borrowing,,

someone cant loan you cash to buy a house and not want the full payment back with interest,,,,,,

spend.......payback whats been spent on it,,,only pay just the min which is the interest,,,you still end up owing whats been spent,just because the interests being paid doesnt mean the bank dont want the rest,


I remember the endowment policy against mortgages,they were based on the current trend at the time.,,they did offfer where you could increase to meet any shortfall in due time.

I certainly hope all these people dont lose their homes and can see a way to work with lenders,

These mortgages were linked to a "With Profits" endowment policy which would pay out on the death of the insured person or at the end of a fixed term. The policy would attract bonuses which together with the original sum insured would at one time be more than sufficient to repay the mortgage. When my endowment policy matured more than 25 years ago there was sufficient to repay my mortgage and leave me with a sizeable amount.
Sadly endowment policies now only pay very low bonuses if any, leaving many people with insufficient funds to repay the mortgage.

When my mate split with her partner in the 90's she got an interest only mortgage.

It worked well, she gained a lot of equity on the house and when she met her new partner, sold up and released the equity

My first mortgage was repayable by endowment....what a joke. I switched 13 years ago to a repayment plan (Interest and capital) Just as well. I have kept the endowment policy but its value is less than half of the expected sum!

The endowment is with SL and they made a written promise (When the markets took a down turn) to honour the initial forecast

.........they later retracted that 'promise'

If you have a young family and are paying £1k a month interest only rather than £1300 for a repayment loan, you may think "the house is increasing in value by £1,000 a month and within another 10 years, children will be leaving home, we will have an extra £120,000 equity in our property and we can sell family house, pay off mortgage and downsize to something cheaper and more appropriate.

You thus have an extra £300 a month to pay for luxuries like gas bill and rates. All of that sounds ok unless 1. house prices fall or remain stagnant 2. one of parents loses their job 3. you want to downsize to a a smaller but quite expensive house of equivalent value.

However these families got in this mess, the lack of movement in the housing market is pushing them over a cliff. Thank goodness there is a reported increase in house prices today. :-)

PP, The mortgage you refer to was not an "insurance" linked mortgage, It was as endowment mortgage which meant you paid the endowment to a "assurance" company that invested your premium the thinking behind it was that the investment would return sufficient funds to pay off your mortgage at the end of the fixed term the other payment was your mortgage which you paid the interest only

endowments went bang in the late 1990? if i remember correctly

assurance and insurance are not the same thing

Roy

I'm sure they may well have been mis-sold Lynda, but even so I'd have thought most would realise that the 'capital' part would have to be paid in the future?....either by having an insurance policy , or savings or selling when in positive equity.

It's not quite like the disastrous endowment mortgages where the endowment policy' failed to produce enough cash to pay off the loan when it matured as happened to many. Or the PPI, which was mis-sold in that in many cases you were told you had to take it out or not get the loan at all.

You don't need to read the small print it's simple

interest only

Are people that stupid they don't understand the words "interest-only " followed by the word "loan" or "mortgage" would mean anything other than what it says on the tin.

if that's the case then the sooner we move to being a fully subscribed Nanny State the better.

Roy