House purchase - cash or mortgage?

[MrXxxx]

1 hour ago, Lightly Toasted said:

2. You are at the whim of the provider who can decide when/if it wants to pay your mortgage back in full before the end of its term.
Don't think they can do this, in general -- the contract will be for a specified period.

Is this not what those with a West Bromwich % below interest rate thought, and then as WB were losing money they 'called in' on this product and when taken to court they [WB]  won?

1 hour ago, Lightly Toasted said:

3. You will have a lower LTV and so may pay a higher interest rate [although I am not sure if this would plateau i.e. would there be much difference between having a 50% LTV vs a 10% LTV [you have 90% deposit].
Surely small mortgage = better LTV = better rate?

Sorry didn't explain this very well, what I meant was actually a higher LTV if you bought with part cash/part mortgage rather than all cash.

[Lightly Toasted]

15 minutes ago, MrXxxx said:

Is this not what those with a West Bromwich % below interest rate thought, and then as WB were losing money they 'called in' on this product and when taken to court they [WB]  won?

This one perhaps:

http://www.commercialblawg.com/banking-law/mortgage-terms-incorporation-case-update-alexander-property118-action-group-v-west-bromwich-mortgage-company/

The right to repayment was in the contract:

...the  Lender’s Mortgage Conditions stated  that the rate of interest specified in the mortgage offer (other than a fixed rate) may be varied by the Lender. It also stated that the loan may be repayable in full on the giving of one month’s notice by the Lender

I think the court would have struck the term down in a consumer mortgage (this was BTL) unless it was spelled out in detail that the term could change -- and maybe it wouldn't hold even then. Repayment on demand defeats the whole point of a mortgage!

[highbot]

I've read that the conveyancer has to do KYC/money-laundering checks.  I don't know how you are supposed to prove where all your money came from, particularly if you've been saving and investing for 30+ years.  Presumably using a mortgage is less suspicious.

Another mortgage advantage was the ability to cash in some investments over a longer time period to use capital gains tax allowances over a number of years.  With the allowance dropping to 3k and rates going up that's not going to help so much any more.

[Bobthebuilder]

On 14/05/2023 at 11:53, onlyme said:

Another option is offset mortgage, you have the mortgage but also the savings to offset a proportion/majority of it depending on terms, turns the mortgage into a interest free savings / cheap loan product in effect whilst you pay it down with regular payments. Worked very well for us. Even better if self employed and income put into the pot until tax due.

Offset 100% if you can, gives you lots of options as all your cards are on the table with the bank.

Best thing I ever did.

[MrXxxx]

14 hours ago, Bobthebuilder said:

Offset 100% if you can, gives you lots of options as all your cards are on the table with the bank.

Best thing I ever did.

Can you expand on what you mean here @BtB, I am being a bit 'dense' this morning.

I think this is also a good point below made by @onlyme...If you have maxed out all your other tax allowances i.e. Income, ISA's, Capital gains, this [alongside VCT (Venture Capita; Trust) ] is a further tax advantage that by paying cash you would miss out on.

On 14/05/2023 at 13:48, onlyme said:

2. Yes, you effectively are getting notional tax free interest at the prevailing mortgage rate, now that rate may or may not be competitive in the market.

[Bobthebuilder]

3 minutes ago, MrXxxx said:

Can you expand on what you mean here @BtB, I am being a bit 'dense' this morning.

You have lots of options with an offset, no interest, freedom to take money out the savings side, payment holidays, overpay whenever you want, borrow more with a facility, and more.

They are a bit hard to get, you have to deal with the specialist mortgage people, jump through a few hoops etc.

I have mine 100% offset, savings match the mortgage amount, so I pay zero interest, but can take the savings with a click of the mouse at anytime, no need for further mortgage applications etc.

[MrXxxx]

4 minutes ago, Bobthebuilder said:

I have mine 100% offset, savings match the mortgage amount, so I pay zero interest, but can take the savings with a click of the mouse at anytime, no need for further mortgage applications etc.

Thanks for the clarification...so in essence your cash savings is acting as a 100% deposit against the mortgage loan, and the BS/Bank are getting the interest on that money RATHER THAN you paying them interest [at a higher mortgage interest rate] on a standard VR or fixed rate mortgage?.

As you rightly point out the advantage is that it gives you flexibility in a number of ways:

1. You can spend/use some of the 100% savings. In this case I assume this would then be classed as a 'loan' i.e. say your saving are reduce to 90% your BS/Bank would be 'giving' you a 10% loan...how does the % for this compare against a SVR mortgage %?

2. How do you pay down/overpay?...I assume you would pay the BS/Bank a lump sum OR Direct Debit, and so your 'loan' with them reduces and as a result requires a smaller 100% saving sum?

3. Trying to think when its best to overpay...am assuming that when interest rates are high its best to overpay, as what you would be getting in saving account interest rate, and the differential between this and a mortgage interest rate would be greater?

4. With this flexibility there must be an additional cost 'above' a vanilla SVR/Fixed term mortgage?

%. Who are you with; understand if you don't want to divulge this so don't feel obliged to answer.

[Bobthebuilder]

5 minutes ago, MrXxxx said:

Thanks for the clarification...so in essence your cash savings is acting as a 100% deposit against the mortgage loan, and the BS/Bank are getting the interest on that money RATHER THAN you paying them interest [at a higher mortgage interest rate] on a standard VR or fixed rate mortgage?.

As you rightly point out the advantage is that it gives you flexibility in a number of ways:

1. You can spend/use some of the 100% savings. In this case I assume this would then be classed as a 'loan' i.e. say your saving are reduce to 90% your BS/Bank would be 'giving' you a 10% loan...how does the % for this compare against a SVR mortgage %?

2. How do you pay down/overpay?...I assume you would pay the BS/Bank a lump sum OR Direct Debit, and so your 'loan' with them reduces and as a result requires a smaller 100% saving sum?

3. Trying to think when its best to overpay...am assuming that when interest rates are high its best to overpay, as what you would be getting in saving account interest rate, and the differential between this and a mortgage interest rate would be greater?

4. With this flexibility there must be an additional cost 'above' a vanilla SVR/Fixed term mortgage?

%. Who are you with; understand if you don't want to divulge this so don't feel obliged to answer.

Mine is with Natwest.

You have a linked savings account to the mortgage, plus the account that you pay the monthly mortgage payment is also linked. You can transfer money from the savings into the mortgage account online to pay any lump sump off. The monthly payment is taken from your linked current account, you can set this at any amount you like to overpay, as long as it is above the minimum monthly amount. The  rate is the banks SVR currently 7.5%

There is an option to borrow more, this runs at a percentage of the loan and reduces as you pay down the mortgage.

No fees for anything, except interest if you drop below 100% offset.

I could have paid the mortgage off in full, but chose the offset as a safety net in case I needed it for anything, if I had paid it off I would have no chance of getting another mortgage at my age plus being self employed on low earnings these days.

[sleepwello'nights]

On 14/05/2023 at 18:26, Lightly Toasted said:

This one perhaps:

http://www.commercialblawg.com/banking-law/mortgage-terms-incorporation-case-update-alexander-property118-action-group-v-west-bromwich-mortgage-company/

The right to repayment was in the contract:

...the  Lender’s Mortgage Conditions stated  that the rate of interest specified in the mortgage offer (other than a fixed rate) may be varied by the Lender. It also stated that the loan may be repayable in full on the giving of one month’s notice by the Lender

I think the court would have struck the term down in a consumer mortgage (this was BTL) unless it was spelled out in detail that the term could change -- and maybe it wouldn't hold even then. Repayment on demand defeats the whole point of a mortgage!

My reading of the case is that the lender was obliged to conform with the terms of the offer letter and the standard terms the lender sought to rely on to change the term and the method of charging interest were inconsistent with the offer letter and had to comply with the terms of the offer it had made.

The following analysis corresponds with my understanding:

https://hsfnotes.com/bankinglitigation/2016/07/25/alexander-v-west-bromwich-mortgage-company-ltd-when-can-lenders-rely-on-contradictory-mortgage-conditions/#:~:text=As the Court pointed out%2C if the Lender,could not be relied upon by the Lender.

TL/DR The lender could not change the interest calculation or demand immediate repayment. 

[UmBongo]

23 hours ago, highbot said:

I've read that the conveyancer has to do KYC/money-laundering checks.  I don't know how you are supposed to prove where all your money came from, particularly if you've been saving and investing for 30+ years.  Presumably using a mortgage is less suspicious.

I have just had to go through all that. Satisfied their final compliance question a few days ago. 18 questions and a few addendum questions. Had to attach bank statements and screenshots of saving account. Also had to dig back through the probate paperwork when my dad died 3 years ago. They wanted to see a copy of the grant of probate and the estate accounts. And did I get a gift from the estate of my mum when she died 5 years prior?

Also they wanted to see not only proof that my recent cheque reached my bank account (that will form part of my deposit) but even the letter that came with the cheque (paid from my stocks and shares account).

They were very thorough, I'll give them that.

[One percent]

6 minutes ago, UmBongo said:

I have just had to go through all that. Satisfied their final compliance question a few days ago. 18 questions and a few addendum questions. Had to attach bank statements and screenshots of saving account. Also had to dig back through the probate paperwork when my dad died 3 years ago. They wanted to see a copy of the grant of probate and the estate accounts. And did I get a gift from the estate of my mum when she died 5 years prior?

Also they wanted to see not only proof that my recent cheque reached my bank account (that will form part of my deposit) but even the letter that came with the cheque (paid from my stocks and shares account).

They were very thorough, I'll give them that.

Nosy buggers aren’t they.  

[UmBongo]

6 minutes ago, One percent said:

Nosy buggers aren’t they.  

I imagine convenyancing solicitors aren't exactly rammed with work currently. I'll take that as a blessing. Things seem to be progressing at a reasonable pace in my case.

[One percent]

1 minute ago, UmBongo said:

I imagine convenyancing solicitors aren't exactly rammed with work currently. I'll take that as a blessing. Things seem to be progressing at a reasonable pace in my case.

Good luck. Hope it all goes smoothly. 

[With a crooked smile]

11 hours ago, UmBongo said:

have just had to go through all that. Satisfied their final compliance question a few days ago. 18 questions and a few addendum questions. Had to attach bank statements and screenshots of saving account. Also had to dig back through the probate paperwork when my dad died 3 years ago. They wanted to see a copy of the grant of probate and the estate accounts. And did I get a gift from the estate of my mum when she died 5 years prior?

Also they wanted to see not only proof that my recent cheque reached my bank account (that will form part of my deposit) but even the letter that came with the cheque (paid from my stocks and shares account).

They were very thorough, I'll give them that.

Last couple off mortgages.ive done they had an app that pulls most of the data from the last 6 months from my current accounts.

I had to provide some basic info on about 30k in shares but that was quite easy as I got those 'free' from work and there was an electronic paper trail showing HMRC had been satisfied these had been treated as salary.

[MrXxxx]

I started this thread on the 14th May and within less than a month this appears [on 9th June]:

...looks as though I am not the only one considering such an approach!