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Interest only mortgage query

Community Veteran
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Registered: ‎06-11-2007

Re: Interest only mortgage query

@MisterW  Thanks for the link.... I shall pass that on....

@nozzer Thanks for the clarification. I shall pass that on, also !

 

Superuser
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Re: Interest only mortgage query

but have any of those who experienced problems heard of claiming compensation against  'endowment mortgage mis-selling'?

 Yes, been there, got the tee-shirtSmiley About 20 yrs or so ago, had an endowment mortgage that wasn't going to meet it's projected return, although it MAY have been sufficient to just about clear the mortgage. Claimed for mis-selling, and after an initial rejection by the Insurance co who claimed the policy was sold by the Building society as an agent, once my wife (bless her) found the old paperwork which clearly showed the Insurance company as selling it, they caved in and admitted mis-selling. With the compensation , we converted to a repayment mortgage and paid it off about 5 years early. Ok, so we didn't get the return that the salesman said would 'pay for my daughters weddings' etc , but were mortgage free much earlier.

Marksfish
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Re: Interest only mortgage query

Just to add what others have said. Someone has been paying a reduced monthly amount because they have only been paying the interest on the borrowed amount, there has been no capital repayment. therefore if you borrowed £100k 10 years ago, you still owe £100k. The lender will probably want their money back, so the options are to find a lender to re- mortgage (preferably with some means of repaying the capital at the end) or sell up and hope there is enough money in the pot to pay it back and put a deposit on another.

Rent to buy properties are usually bought on interest only as they are more tax efficient.

 

Mark

Jonpe
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Re: Interest only mortgage query

There were a couple of advantages with endowment mortgages:  Firstly, they would usually pay off the mortgage if the holder died after the first two years, which would be of great benefit to his/her family.  Secondly, if you moved during the 25 years, and most people do, you would be able to pay off a substantial part of your new mortgage when your old endowment policy matured.

I took out an endowment mortgage in 1983 when they were worth considering, and an interest-only tracker mortgage when I moved in 2004.  The endowment policy was guaranteed to pay out £25,000 (the amount of my first mortgage; those were the days!) and ended up paying out about £35,000 when it matured in 2008.  I'd been busily putting aside as much as I could while paying the bank interest only so when my policy matured I was able to pay off my new mortgage.  Typically with my luck, had I kept the mortgage going, I would only have been paying £50/month after the interest rates plummeted.

Several people I know with tracker mortgages have managed to pay off a substantial amount of capital since the interest rates dropped, by continuing to pay the same amount as before.

VileReynard
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Re: Interest only mortgage query

I took out a 100% endowment mortgage of £56,000 over 25 years on a London flat about 35+(?) years ago. I just paid the interest - but I was able to sell just before tax relief was withdrawn on new endowment mortgages - so it was a sellers market.

I kept the endowment mortgage running for each future house I moved to, no additional mortgages were ever taken. When the endowment eventually paid out it was about £20,000 short - but over 25 years I'd saved enough to pay for the shortfall.

By buying early using a dodgy financial product, I was able to buy before prices had increased out of reach. Endowment mortgages turned out to be a gamble that paid off - despite the difficult periods of some very high interest rates.

Luzern
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Re: Interest only mortgage query

@VileReynard before the 80s endowment mortgages benefited from two reliefs; Life Assurance Premium Relief (LAPR) @12.5%, and Mortgage Interest Relief. The borrower had to claim in his annual return, though IIRC  for PAYE personal codes were provisionally adjusted in the payment year. You said the MIR was abolished; in fact it was replaced by Mortgage Interest Relief at Source (MIRAS). Lenders reduced the interest by the notional amount of tax due (again IIRC) at standard rate, and reclaimed  it from the IR. The relief was abolished in 2000 by Brown.

LAPR was available on policies taken out up to 13 March 1984. It was abolished On premiums payable from the start of 2015/16.

No one has to agree with my opinion, but in the time I have left a miracle would be nice.
VileReynard
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Re: Interest only mortgage query

Thanks for that!

I have only the vaguest of notions about tax relief(s)!!!

Probably ties the sale of that flat down to about 1983/84 - I've a vague idea that couples taking out an endowment mortgage got two lots of tax relief up to that date? I haven't paid any mortgage for quite a few years. Smiley

Champnet
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Re: Interest only mortgage query


@VileReynard wrote:

 

 I've a vague idea that couples taking out an endowment mortgage got two lots of tax relief up to that date?


Unmarried couples could claim two lots of mortgage tax relief up to £30,000 Maggie put a stop to it and created a rush to buy..

We were looking for a property in Brighton and the prices were going up by the day. I remember we were viewing places in groups of people and offers were made there and then. We ended up in Worthing.

Luzern
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Re: Interest only mortgage query

@Champnet So you ended up on the Costa Geriatrica, very young, and not bustling Regency Brighthelmstone.Grin

No one has to agree with my opinion, but in the time I have left a miracle would be nice.
Jonpe
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Re: Interest only mortgage query

Yes, the 1987 rush I think that was; relatively 'new' couples bought studio flats in order to get on the property ladder before tax relief was abolished, then the relationship ended, neither could afford to buy out the other person, prices had fallen so they were in negative equity and were forced to continue living with their ex-partner in a 'shoebox'.

VileReynard
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Re: Interest only mortgage query

At one point I had 3 couples in my little studio flat at the same time. Couple A made a pretty decent bid, couple B increased it moderately then the obnoxious bloke half of couple C made a ludicrously high bid - so I settled for couple B.

It was like sharks in a feeding frenzy. Horrible to watch, even though I did well out of it.

Champnet
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Re: Interest only mortgage query

@Luzern Worthing wasn’t that bad. It was full of ex Londoners who’d cashed in on their properties gains.

Plenty of wealth about, I remember a Ferrari dealership in the town....

Started working in London so we moved to somewhere a bit different, Croydon....

 

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VileReynard
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Re: Interest only mortgage query

Never mind. Cheesy

christmas
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Re: Interest only mortgage query

We took out an interest only mortgage when they first came into fashion, as a customer I often had to explain to the staff of the mortgage provider how it worked.

At the time there were no penalties for reducing the capital loan or paying the mortgage off early, although the mortgage provider did try to add a £250 admin fee on closing the mortgage.

 

 

 

christmas
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Re: Interest only mortgage query


@Luzern wrote:

@Champnet So you ended up ......not bustling Regency Brighthelmstone.Grin


Spooky....I was searching a government database for someone born in Brighton eventually he popped as being born in Brighthelmstone, I let them know it should be Brighton but they said the database is correct, yet the printed version has it as Brighton. I'd never heard of Brighthelmstone before.