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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

to think that if you took out an interest only mortgage....

194 replies

CherylWillBounceBack · 31/10/2012 17:19

....that the clue to how the product worked was in the title.

www.dailymail.co.uk/money/mortgageshome/article-2225427/Over-50s-mortgage-trap-cost-home.html

To be clear I'm not attacking those who fell foul of endowment policies, but those who have either taken on more than they could have ever afforded as a repayment scheme, and even more at those that have released equity from these homes to fund a 'lifestyle'. It makes me absolutely irate as a saver who has seen people bidding up the property market to insane levels using borrowed money which it turns out they had no vehicle in place to pay back. They are now claiming they didn't understand what they had got themselves into.

They are not victims of anything other than greed and stupidity, and with the media coverage they've been getting over the last few weeks, it looks like we are now we are heading towards another bailout of the profligate, at the expense of those who saw this coming years ago and have seen their savings decimated due to inflation and low interest rates.

Disclaimer, I don't own a house, I stayed out and attempted to save up for one outright only to see the prices spiral out of control and then be propped up by all manner of schemes for those who have overstretched.

To quote Paul Daniels, if there's another bailout of either the banks or those who have been feckless, I'm leaving the country.

OP posts:
suburbandream · 31/10/2012 17:46

I saw that article today (didn't buy the DM, read it in a coffee shop - honest Grin). I'm afraid although I do feel sorry for these people, it really is their own fault. Surely it's pretty clear what "interest only" means?

HeinousHecate · 31/10/2012 17:47

It wasn't clearly explained to them Hmm

I'm sorry, but exactly how dim do you have to be to fail to understand the meaning of Interest Only?

Interest only.

Only the interest.

It's hardly reviewing the present status of the spin foam formulation of non-perturbative quantum gravity.

It's understanding the words interest and only.

NewFerry · 31/10/2012 17:49

We have just finished paying our mortgage with an endowment mortgage. Even though the endowment paid less than it was supposed to (as has everyone else's) it was still a cheaper option for us as we moved home 7 times in 25 years so it was a better mortgage vehicle in that situation.
Luckily, we had overpaid in the good times so the endowment did clear the outstanding amount

However, that is hugely different to interest only mortgages. And I agree with the poster who said the banks have given these on the assumption house prices will continue to rise.

In effect, interest only mortgages are the equivalent of paying rent, ie, you are not paying anything towards the value of the house, just paying to live in it.

CommanderShepard · 31/10/2012 17:50

YANBU. I have an interest only mortgage; the difference between it and the cost of a repayment mortgage is in a maxi ISA. The IFA we use recommended it.

LIZS · 31/10/2012 17:51

And it isn't as if there has been a sudden downturn in fortunes. The investments started to go awry 15+ years ago. We kept have kept our policies going and they are due to mature in about 2 years time but have long since givne up hope of them paying off anywhere close to the amount orignally intended. tbh when we first took out a mortgage it was through dh's work and there were only endowment mortgages on offer. It was always a risk though, just poeple conveniently overlooked that part of the small print whenr things were booming and they thought they'd be quids in.

kim147 · 31/10/2012 17:52

This reply has been deleted

Message withdrawn at poster's request.

noisytoys · 31/10/2012 17:53

When we bought our house in 2008 we were offered 10x our salary on an interest only mortgage. I thought that was stupid. We took 4x our salary on an repayment mortgage and the payments are still high

JenaiMarrHePlaysGuitar · 31/10/2012 17:55

Viperidae I would riot in the streets [hgrin]

These people are trying it on. I sincerely hope they don't get away with it.

expatinscotland · 31/10/2012 17:55

YANBU

BelaLugosisShed · 31/10/2012 17:56

I remember when DFIL and DMIL came to the end of their endowment mortgage, they had a cheque through the post and spent it on the house before getting a letter saying their mortgage was due for settlement, they didn't understand that the endowment money was there to pay off the mortgage - luckily it was only £3K.
How could anyone be so stupid to not realise that an interest only loan will mean that the original sum borrowed is not cleared without another repayment method?

expatinscotland · 31/10/2012 17:58

And NO I do not believe the taxpayer should bail out any of them! Why should I pay to buy them a house when I can't even afford one myself and they were stupid? Not my lookout.

MadBusLadyHauntsTheMetro · 31/10/2012 17:58

Oh FFS! Even without the "interest only" thing that article is the most incredible whiny shite I've ever read since I last read anything in the DM.

It left them with a terrible dilemma: they would have to move out of the house where they had spent three happy decades or take on more costly debt that would devour their children?s inheritance.

Well, my parents were also left a bit short on the mortgage when they retired, and "had to move out of the house where we had spent two happy decades" and guess what: NOBODY DIED! I can't even remember it being a "dilemma". It was just "Oh dear, we need to sell the house. That's exciting, where shall we move to?"

Why does anybody think that because you're over 60 (which is hardly "old" these days) you're suddenly excused from making all the normal, difficult choices about affordability and living standards that we all have to make?

expatinscotland · 31/10/2012 17:58

Boohoo, spend their children's inheritance. FFS.

FunBagFreddie · 31/10/2012 17:59

What people seem to forget is that while they are paying the mortgage, the house isn't theirs - the bank owns it and they can take it back (in theory) as soon as you miss a paymemnt. I'm assuming that all adults realise this when they buy a house.

Needs a 'rolls eyes' emoticon.

JenaiMarrHePlaysGuitar · 31/10/2012 18:03

Arf MadBus - that "terrible dilemma" made me chortle.

MadBusLadyHauntsTheMetro · 31/10/2012 18:03

They've got to be taking the piss with the last guy, the City worker with the £1m house who "took a series of bets on the property market". They've got to be.

TheCrackFox · 31/10/2012 18:04

Completely agree, a mortgage is just a fancy way of renting - you do not own your house until you have fully paid off the mortgage. It isn't a difficult concept.

TunipTheHollowVegemalLantern · 31/10/2012 18:05

YANBU!
A bailout will make me exceedingly grumpy.

Bogeyface · 31/10/2012 18:15

Baby boomers who want it all on a plate.........again Hmm

Rangirl · 31/10/2012 18:19

It is important to remember there is a difference between an interest only mortgage with an investment product in place where there might not be enough to pay off the loanj and one where there isno investment product in place The 2nd case is not uncommon

mutny · 31/10/2012 18:24

I have never had an interest only mortgage.

However i know mum and dad got burnt in the whole endowment crap that happened. I was a self involved teen at the time and still knew about it.

They got loads of letters. I even remember mum and dad talking about it. Obviously only picked up bits between my angst and self involvement. :)

If i knew, the people with the mortgages knew. Or they just ignored all letters and the original agreement.

I get sick to death of people not taking responsibility for themselves and their decisions and papers fucking giving them the time of day.

We all make decisions about our financial future, some pay off and some don't. but burying your head in the sand isn't an excuse.

Bogeyface · 31/10/2012 18:24

My friends had an endowment that was underperforming and ended up selling their house as they knew that they wouldnt be able to cover the shortfall themselves. I have no issue with that, as I dont with the endowment policy couple in the article.

Its people who sign up for an interest only mortgage and then complain when they stand to lose their home when they havent set up anyway to repay the capital.

That first couple are amazingly stupid with money! I am frankly astounded that they have managed as long as they have!

Badvoc · 31/10/2012 18:30

When we took a mortgage out for our first home we were really pushed into considering an endowment.
We said no.
Much to the advisors disgust.
Turns out they get more commission on an endowments.
We have always reasoned we need to be able to pay whatever mortgage we had if the rate was 10%.
Of course if IR go higher than that we are buggered :(

noddyholder · 31/10/2012 18:34

There are loads of people who have lived it up paying the bare minimum every month who now they have to pay up suddenly 'don't get it'! It is why you paid so little fgs.I agree if the govt bail this lot out I give up.

expatinscotland · 31/10/2012 18:34

There's not a lot of sympathy for them in the comments. Why should there be? These people are idiots. And they can still sell their house for great profit over what they bought it and downsize.