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One percent

Interest only mortgages and the feckless elderly

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http://www.dailymail.co.uk/money/mortgageshome/article-5679831/Len-Val-never-missed-mortgage-payment-face-losing-home.html

Len and Val Fitzgerald had planned to spend a peaceful old age in their little terrace house in Eastbourne on the Sussex coast.

The Fitzgeralds, both 76, have invested many hours redecorating and improving their two-bedroom property to turn it into a quiet retirement haven for themselves and their beloved dog, Millie.

But now the couple, who have never missed a mortgage payment, are being taken to court for an eviction hearing by their bank, Santander.

If the judge sides with Santander, the Fitzgeralds face being turfed out of the home where they have lived for 15 years.



Ok, very sad, but then we get to the figures

For three years, the couple tried to negotiate with the bank, arguing that they were still able to pay the £770-a-month mortgage bill from their £1,300 joint income and £200 of mortgage interest support from the Government.

 

it then goes on to detail the mortgage 

How do you get into a position of a 180k interest only mortgage when in your 70s?  Wtf have they been spending it all on? 

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They just come across as irresponsible and people in the comments are seeing through the sob story. If they had any sense they'd take the 80K and buy an entry level terrace somewhere in the north. 

Quote

The next year, the couple extended the loan by almost £40,000 to make home improvements to see them through retirement, including putting in new windows and a second toilet.

 

Edited by ThePiltdownMan

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They've simply tried to game the system, like so many others. Simplistically, it is the system that is wrong not them. Although actually it's still them as part of a collective, as the system was constructed to secure their votes.

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Reading through the whole lot they appear (ok, their side of the story is given but it seems credible) to be a working couple with him having decent level jobs who have suffered several misfortunes but who haven't been spendthrift.  The additional £40k they borrowed were for home improvements.

They can keep paying the IO mortgage at the current level indefinitely but you don't have to be Mystic Meg to see that they could really struggle in the future, either through interest rate rise or the death of one of them.

Santander is acting rationally in not extending the IO mortgage further owing to their ages and what the future holds.

There are however other options available to them.  If they are prepared to sell the house at a discount of the £80k in equity they do hold then the local housing association will usually buy it and give them a lifetime tenancy so that they can stay in their house albeit now renting it.

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3 minutes ago, ThePiltdownMan said:

They just come across as irresponsible and people in the comments are seeing through the sob story. If they had any sense they'd take the 80K and buy an entry level terrace somewhere in the north. 

 

As you say, in 2006, and when already struggling to pay the mortgage, accountant Ken and logistics expert Val, took out a £40k loan

With brains like that, we're doomed I tell ya

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22 minutes ago, One percent said:

http://www.dailymail.co.uk/money/mortgageshome/article-5679831/Len-Val-never-missed-mortgage-payment-face-losing-home.html

Len and Val Fitzgerald had planned to spend a peaceful old age in their little terrace house in Eastbourne on the Sussex coast.

The Fitzgeralds, both 76, have invested many hours redecorating and improving their two-bedroom property to turn it into a quiet retirement haven for themselves and their beloved dog, Millie.

But now the couple, who have never missed a mortgage payment, are being taken to court for an eviction hearing by their bank, Santander.

If the judge sides with Santander, the Fitzgeralds face being turfed out of the home where they have lived for 15 years.



Ok, very sad, but then we get to the figures

For three years, the couple tried to negotiate with the bank, arguing that they were still able to pay the £770-a-month mortgage bill from their £1,300 joint income and £200 of mortgage interest support from the Government.

 

it then goes on to detail the mortgage 

How do you get into a position of a 180k interest only mortgage when in your 70s?  Wtf have they been spending it all on? 

Sounds as if they need to speak to some of the providers of home reversion plans or search the internet for lifetime mortgages. https://www.moneyadviceservice.org.uk/en/articles/lifetime-mortgage.

Mind you the LTV must be a problem with £180k outstanding on a little terrace house in Eastbourne.

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18 minutes ago, Hopeful said:

As you say, in 2006, and when already struggling to pay the mortgage, accountant Ken and logistics expert Val, took out a £40k loan

With brains like that, we're doomed I tell ya

Not much of an accountant. I hope he wasn’t advising others. 

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Hmm.  76 now, bought in 2003.  They weren't 'in their 50's' when they bought -- they were in their 60's.  The bank was mad.  They were mad.  Everything's mad.

Oh, and they likely didn't leave Kenya and Zambia because of political instability.  They probably decided to leave as, both turning 60, they reckoned that the NHS was worth having at that point -- after not paying in during their 'income generating' days.

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1 hour ago, Hopeful said:

As you say, in 2006, and when already struggling to pay the mortgage, accountant Ken and logistics expert Val, took out a £40k loan

With brains like that, we're doomed I tell ya

expert and acountant in the same sentance never bodes well

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1 minute ago, DTMark said:

When the bank repossesses the house: to whom does the house belong?

The bank.  Part of having a mortgage is that they get a charge registered upon the house as security.

This security is why they will lend on a mortgage at much lower rate than a personal loan.  If it collapses they will take and auction the house so their only loss woudl be the extent to which the auction proceeds fail to meet the outstanding mortgage.

This auction process horrifies many repossessed ex-homeowners as the bank is quite happy to take £20k or more under MV as long as they get their money back quickly so it's their call as to how much the house realises despite anything over the outstanding mortgage balance going to the previous homeowners.  The bank does not care about them, only about getting their money back quickly, so you are always better selling your house yourself rather than waiting for it to be repossessed and hoping you then get a payout.

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Just now, Frank Hovis said:

The bank.  Part of having a mortgage is that they get a charge registered upon the house as security.

This security is why they will lend on a mortgage at much lower rate than a personal loan.  If it collapses they will take and auction the house so their only loss woudl be the extent to which the auction proceeds fail to meet the outstanding mortgage.

This auction process horrifies many repossessed ex-homeowners as the bank is quite happy to take £20k or more under MV as long as they get their money back quickly so it's their call as to how much the house realises despite anything over the outstanding mortgage balance going to the previous homeowners.  The bank does not care about them, only about getting their money back quickly, so you are always better selling your house yourself rather than waiting for it to be repossessed and hoping you then get a payout.

I thought so.

But, without sounding too much like a conspiracy loon, the bank didn't lend the couple anything. It created the money. (Fractional/zero/below-zero reserve banking).  It then effectively rented that created money to the couple.

What a way to "buy" large swathes of property. Pity we can't all get in on that act.

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2 minutes ago, DTMark said:

I thought so.

But, without sounding too much like a conspiracy loon, the bank didn't lend the couple anything. It created the money. (Fractional/zero/below-zero reserve banking).  It then effectively rented that created money to the couple.

What a way to "buy" large swathes of property. Pity we can't all get in on that act.

Other than that it can often go wrong as in 2007 when the ready supply of overnight money gets turned off; which caught Northern Rock.

The bank though isn't buying the property or profiting from the repossession, it just gets back the money it has lent (which is the extent of the charge) and the previous owners get the balance.

As all the bank gets back is the outstanding mortgage then the only criteria for the bank are: sell it for at least this and sell it quickly.

This is why repos are the best deal at auctions; the reserve is the outstanding mortgage.

Anyone passively letting their house be repossessed rather than selling it themselves and repaying the mortgage is going to be forgoing a serious amount of money.

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7 minutes ago, DTMark said:

I thought so.

But, without sounding too much like a conspiracy loon, the bank didn't lend the couple anything. It created the money. (Fractional/zero/below-zero reserve banking).  It then effectively rented that created money to the couple.

What a way to "buy" large swathes of property. Pity we can't all get in on that act.

The bank isn't interested in owning property.  They just want to generate debt.  That is all they can do -- that is their function.

12 minutes ago, Frank Hovis said:

This auction process horrifies many repossessed ex-homeowners as the bank is quite happy to take £20k or more under MV as long as they get their money back quickly so it's their call as to how much the house realises despite anything over the outstanding mortgage balance going to the previous homeowners.  The bank does not care about them, only about getting their money back quickly, so you are always better selling your house yourself rather than waiting for it to be repossessed and hoping you then get a payout.

Yup.  If you really are about to be repossessed the absolute best thing you can do is sell up yourself.  Of course, the protagonists usually have had years of leniency, so they never actually do this, presuming that the lovely leniency will continue.

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2 hours ago, One percent said:

 

The Fitzgeralds, both 76, have invested many hours redecorating and improving their two-bedroom property to turn it into a quiet retirement haven for themselves and their beloved dog, Millie.

But now the couple, who have never missed a mortgage payment, are being taken to court for an eviction hearing by their bank, Santander.



How do you get into a position of a 180k interest only mortgage when in your 70s?  Wtf have they been spending it all on? 

When did they take the mortgage?

They moved in 15 years ago. So would have been 61. And that would have been in 2003. Was that about the start of house price insanity cos lending went mad?

If they've not missed a payment why are they being evicted?

more to this than meets the eye.

Piss poor lending.
Piss poor intelligence and sense on both bank and people.

Someone I know was planning on retiring this year and paying off his mortgage with his aunt's money. She's still living and he's now got to work for another 8 or so years. He's got a couple of pensions paying out already - so lord knows why they haven't paid off the mortgage. Oh yes, a 6k sofa might be a little bit of a reason.
 

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' But now the couple, who have never missed a mortgage payment, '

Ahh, Prof Spy from ToS.....

Its an IO loan. There's a huge fucking payment right at the end of the term. Thats the one payment they are missing.

Regulated banks should not be writing IO loans.

If they want to continue the mortgage than the bank need s to hold 100% of the capital for the loan.

Why are they getting SMI payments with that income?

Does not matter as SMI is now a charge, which is why the bamks wants shot.

Idiot banks should have not loaned to these idiots.

 

Just now, sarahbell said:

When did they take the mortgage?

They moved in 15 years ago. So would have been 61. And that would have been in 2003. Was that about the start of house price insanity cos lending went mad?

If they've not missed a payment why are they being evicted?

more to this than meets the eye.

Piss poor lending.
Piss poor intelligence and sense on both bank and people.

Someone I know was planning on retiring this year and paying off his mortgage with his aunt's money. She's still living and he's now got to work for another 8 or so years. He's got a couple of pensions paying out already - so lord knows why they haven't paid off the mortgage. Oh yes, a 6k sofa might be a little bit of a reason.
 

Id guess was a 15 year mortgage.

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4 minutes ago, dgul said:

The bank isn't interested in owning property.  They just want to generate debt.  That is all they can do -- that is their function.

But property is a highly unusual asset class. If we were talking about, say, cars: the bank lends you the money to buy a brand new car. You make some payments and default. Bank gets and sells the car. They may still "come up short". Because the car depreciates like anything else.

Except property. Even if it crashes in the short to medium term, it will normally recover by the end of the mortgage term.

Thus encouraging a style of behaviour that means that progressively, banks aren't interested in lending for much else other than property. It carries little to no risk. The bank gets the interest on the money they themselves created, and at the end, they also get the asset which is worth more (or perhaps more accurately priced higher) than it was at the start.

Thus it's possible to see that when Clinton wanted to push "home ownership" but there was that one slightly awkward thing constraining this - affordability - all you do is create an ingenious way to remove that barrier. Everyone wins.

Except they don't because it's this that saw property prices go sky high, costing everyone more labour to buy the same thing. Works beautifully for governments and banks. Makes the model work. Not so much for anyone else.

It is ultimately doomed to fail in the end, but in the decades that takes, the banks are profitable and if it all does fail, they'll get "bailed out" anyway. Right up to the point where that takes down the entire currency. Guessing this is why banks like single currencies like the Euro?

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5 minutes ago, sarahbell said:

When did they take the mortgage?

They moved in 15 years ago. So would have been 61. And that would have been in 2003. Was that about the start of house price insanity cos lending went mad?

If they've not missed a payment why are they being evicted?

more to this than meets the eye.

Piss poor lending.
Piss poor intelligence and sense on both bank and people.

Someone I know was planning on retiring this year and paying off his mortgage with his aunt's money. She's still living and he's now got to work for another 8 or so years. He's got a couple of pensions paying out already - so lord knows why they haven't paid off the mortgage. Oh yes, a 6k sofa might be a little bit of a reason.
 

Well Id guess the bank lumbered with the mortgage isnt the same that made the loan ...

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Just now, spygirl said:

Well Id guess the bank lumbered with the mortgage isnt the same that made the loan ...

If it's the end of the term then it's a fair cop.

But someone needs to slap banks for stupid lending. Tax payer can't be bailing them out again

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4 minutes ago, DTMark said:

But property is a highly unusual asset class. If we were talking about, say, cars: the bank lends you the money to buy a brand new car. You make some payments and default. Bank gets and sells the car. They may still "come up short". Because the car depreciates like anything else.

Except property. Even if it crashes in the short to medium term, it will normally recover by the end of the mortgage term.

Thus encouraging a style of behaviour that means that progressively, banks aren't interested in lending for much else other than property. It carries little to no risk. The bank gets the interest on the money they themselves created, and at the end, they also get the asset which is worth more (or perhaps more accurately priced higher) than it was at the start.

Thus it's possible to see that when Clinton wanted to push "home ownership" but there was that one slightly awkward thing constraining this - affordability - all you do is create an ingenious way to remove that barrier. Everyone wins.

Except they don't because it's this that saw property prices go sky high, costing everyone more labour to buy the same thing. Works beautifully for governments and banks. Makes the model work. Not so much for anyone else.

It is ultimately doomed to fail in the end, but in the decades that takes, the banks are profitable and if it all does fail, they'll get "bailed out" anyway. Right up to the point where that takes down the entire currency. Guessing this is why banks like single currencies like the Euro?

No. Totally wrong.

Houses have a limited life span. The land doesnt.

Thats a very Southern centric view of property/land.

I know of a few places in the North where property has fallen in nominal terms voer 20 years. There are places where prperty/land changes had for a few 1000 i.e. a fwe years ctax.

With the loss of financial service jobs te SOuth is going to see similar falls that were seen in places like Wakefield and Co Durham mining.

Things change.

Just look at the empty shops.

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1 hour ago, sarahbell said:

When did they take the mortgage?

They moved in 15 years ago. So would have been 61. And that would have been in 2003. Was that about the start of house price insanity cos lending went mad?

If they've not missed a payment why are they being evicted?

more to this than meets the eye.

Piss poor lending.
Piss poor intelligence and sense on both bank and people.

Someone I know was planning on retiring this year and paying off his mortgage with his aunt's money. She's still living and he's now got to work for another 8 or so years. He's got a couple of pensions paying out already - so lord knows why they haven't paid off the mortgage. Oh yes, a 6k sofa might be a little bit of a reason.
 

I am in tears it is so sad they have not missed a mortgage payment  and are being evicted ........ they have not missed a payment because you and I have been chipping in with £200 a month via SMI. They have lived there paying interest only, or rent as some people call it, they had the option of owning the property by paying the capital when it was due but they made no provision to do so. The asset will be sold and they will still net out £80,000 tax free .... kerchhiiiiinggg. Their preferred option is to continiue with the IO / rent with the  £200 a month top-up   from you and I while keeping the £80,000 profit and then presumably doing some form of equity release of the £80,000 to buy a new ranger rover and go on some cruises ...

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13 minutes ago, satch said:

I am in tears it is so sad they have not missed a mortgage payment  and are being evicted ........ they have not missed a payment because you and I have been chipping in with £200 a month via SMI. They have lived there paying interest only, or rent as some people call it, they had the option of owning the property by paying the capital when it was due but they made no provision to do so. The asset will be sold and they will still net out £80,000 tax free .... kerchhiiiiinggg. Their preferred option is to continiue with the IO / rent with the  £200 a month top-up   from you and I while keeping the £80,000 profit and then presumably doing some form of equity release of the £80,000 to buy a new ranger rover and go on some cruises ...

Exactly

I have zero sympathy.

They have made no provision for themselves. I don't know why the feck they should be entitled to £200 a month.

They can do what I'll do if i can't fund myself. Shuffle off under a bush.

 

 

(That actually conjures up a marvelous thought)

Edited by Hopeful

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