Does this financially ring true?

[ManyBooksLittleTime]

We bought our house nearly 20 years ago for 245k. Now, 19 years later, we still have 203k left on the mortgage. I know the first years is basically paying interest , but only 42k in 19 years??? We have had good interest rates too.Also, my husband reckons it will go down to 181k by August next year. Please can soneone more astute with finance let me know if these numbers can be right?

I live near Glasgow. I bought a house for just over £200k in 1999 which would be worth around £500k now. And there were many houses and even flats for sale at that time which would have sold for far more than that . How can you possibly believe that there were no houses costing over £245 k outside London in 2002. How Londoncentric

Assuming worst case, ie 100% loan, 5% average mortgage rates, the broad position would be:

• At 19 years a balance outstanding of £108,124
• Annual payments of £16,782 (ie £1,395 a month)
• Total payments over 19 years of £317,908
• Of which interest is £181,302

But the key issue is that even at 5% interest rates, the balance would be £108k.

You took out smallish extra loans to pay off credit cards, but these would not affect the above too much. If the mortgage was interest only, the balance would not go down, but you have confirmed you understood the mortgage to be capital repayment.

As you say, the interest is higher in the first year (£12k of the £16k) and by year 19 it would be lower (£5k of the £16k).

Either you have been on interest only and paying peanuts each month for several years, or the mortgage has been increased materially and that money has been used for something else without your knowledge, or the lender has made a colossal mistake. My guess is your husband has either taken remortgage money for something else or debited payments from your joint current account to another accounts, split off some of the payment to pay interest only and retained some of each monthly payment without telling you.

Whenever we have remortgaged (if changing the amount or the term) the lender has insisted on speaking to both of us on the phone before going ahead. They have wanted to know we both understand the amount and the term agreed to.

Surely you have had something similar? To be fair my DH is probably a bit daft and just goes with what I say (high level finance job but trusts me, thank goodness I'm honest!). I always make sure I show him the paperwork and statements though and we can both see it on our banking app.

Something certainly doesn't add up, going by the figures you've stated.

To repay the 203k over the next 8 years would be £2115 a month before adding any interest at all, i.e. 0% interest. Your current rate is very low, so if you had the benefit of that for the next 8yrs £2200 a month would cover it. But current rates are about 5% at best, which would need £2570 a month to repay it. You've had the advantage of exceptionally low rates over the 14 years, but somehow not reduced the balance. Now rates are jumping up, you're going to take a spanking unfortunately.

Not sure what rates and deal you've had over the past 19 years. Or how much you've been paying per month (inc any over payments). But assuming an average 4% and no overpayments, you'd have been paying £1240 a month. But crucially, by now, year 19, your remaining balance should have been down to about 100k. You should have got down past 200k at least 10 years ago (by year 7).

I agree with the others that there's about 100k unaccounted for somewhere in all this. 5k credit card consolidation on a couple of occasions does not explain this at all.

As for what to do now - if you refix now, you'll be straight up to 5% immediately, and you'll probably have to pay an ERC (at best that'll be 2k, could be a lot more). So you'll be speculating on the current offers of 5% being better than what's available by next August, which yes, could well be even higher. But to change now would cost you around an extra £10k for certain (8k interest, 2k ERC).

I'm in a similar situation with my current fix ending later next year. Your choices are either to pay that 10k penalty up front to lock in 5% rate for an extra 4 years, or to take a chance on rates not going up much higher/coming down again towards the end of next year and keep your current fix for the remaining 10 months. If you've got savings, or ability to overpay regularly, I'd be inclined to chuck everything you can at it over the next 10 months and then take stock.

If mortgage rates are up to 7% next August then you'll be about 6k worse off overall, than taking 5.1% now. If they only go up to 6%, then you'll be 3k better to wait til then rather than jumping for 5.1% now. You should probably check all these calculations out for yourself though. Plenty of online mortgage calculators (I used the Money Saving Expert one for these estimates).

Check what your overpayment allowance is (typically 10% of the balance), and when it's annual anniversary is. If you're lucky you might be able to use two years worth of overpayment allowance between now and next Aug. Also bear in mind that at the end of your current fix, you should have the option to pay off lump sum of any amount without no penalty. Not sure exactly how that works if you've already pre arranged a new fixed rate to take over though?

Your husband is lying to you. Call the mortgage company and ask them to explain the figures so you know the exact situation before you speak to him.

I can't make out the numbers, but "you" have been borrowing extra money over the years, so the balance is bigger than if you had just been paying off a repayment mortgage.

Whether the money has been spent on home improvements, new cars, holidays or gambling is a different matter.

It is concerning that you have not seen the mortgage statements and do not know what has happened.

It will not be paid off as quickly as you were expecting. When do you hope to retire?

They won’t have any equity if they’ve been on an interest only mortgage all that time?

I know absolutely nothing about mortgages op.
I still live with my parents, husband and children, I'm 33, it's not the best lol, I just pay rent, utilities and everyone's food etc, But I know when a family member bought this house for a family members specific needs in 2001, it was 95k..lovely area and four bed, three bath with garden. West mids area.

did you buy somewhere expensive? I think something must have got muddled up perhaps? Because that can't really be right can it?. Do a credit check on yourself is my only advice now 💐

@itsasadworldneverforget

Thanks

In a world where house prices only go up, they will.

If they bought a house for £1, on an interest only mortgage, and after 20 years it was worth £5, they would have £4

Of course, to buy an equivalent new house would also cost them £5. Or they could perhaps live in a tent and pocket the £4.

Aww @PigletJohn, off topic but nice to see you active!

I haven’t read all the comments so not sure if this has been suggested, but does your husband gamble?

I was your husband 3 years ago, go into a hole of gambling addiction, took out loans to fund it, then remortgaged the house borrowing extra without my husband realising, thankfully it wasn’t much and I managed to get help and overcome it, but this is what gambling does to people unfortunately.

If he’s not telling you how much has been borrowed and exactly where that money has gone, then unfortunately a gambling addiction could very well be the reason.
I really hope it’s not OP, as it’s an awful addiction that ruins people

Also, if it is gambling related, don’t expect it to just go away and expect him to stop overnight, it won’t and he won’t

No, something is very wrong. We have a repayment mortgage for £200k that we took out in 2009, so there’s 12 years left to pay on it. We pay about £860 a month and there’s about £95k left to pay off.

Another thought. You would have had a mortgage statement every year explaining how much you had paid and what the remaining balance was. NB. It was a paper statement.
We had a similar mortgage and when rates went down we maintained or overpaid considerably. Never paid more than £1200 monthly.
Mortgage is completely paid off now.

‘…and hope he can remember how much we borrowed.’

Hope?
Remember?

Where do you keep the paperwork, the copies of the documents that you have signed?

This does not sound too promising.

Hope you get to the bottom of this OP. Definitely need to get the mortgage statements asap xx

Yes they will because the overall value of the house will in all likelihood have risen in 20 years irrespective of what kind of mortgage was taken out.

A house worth £245k 20 years ago might now be worth double or more that now depending on where in the country it is.

Say it’s now worth £500k, even with £200k left on the mortgage there is still have £300k equity, even if technically there should be more as the mortgage should be almost paid off.

You could still sell, pay off the £200k, be in profit and buy a property for £300k (ignoring fees etc, I’m just illustrating).

These figures are completely wrong, even when borrowing ‘a bit more’ (£5-7k) twice. I worked on a mortgage admin team (a few years ago now but still) and these figures just do not ring true to me. There is every chance your DH has remortgaged without you. Unfortunately even when policy came in regarding two signatures for additional lending, some MAs did not do their due diligence and gave paperwork for husbands/wives/partners to take home and bring back signed. I unfortunately saw lots of additional lending behind a partners back and in a few awful situations this even led to repossession.

The figures you’ve quoted just do not make sense. Even if the interest rate you borrowed at was 8% (I seem to remember rates being anywhere between 5-7% at this time) and the extra borrowing was there are at the very start of the term, you’d still only owe around £140-150k (obviously my calculations are not an exact science as I don’t know the individual rates you’ve had, I’m working on a ‘worst case’ scenario). Im afraid everything points to your DH lying to you. The good news is, if he has forged your signature on any mortgage additional lending documentation, you are not liable for those payments and there is a process to get this resolved. Happy to answer any questions on it if you want to PM me.

@uiyo7987

What are you talking about? I bought a flat in glasgow city centre in 2006 for £220,000.

Do you actually think that no where outside of london could possibly cost over £200,000?

Why are so many Londoners so clueless about the rest of the UK?

I wouldn’t trust your H as far as I could throw him. He’s either financially inept or deceitful. Your H “not explaining things accurately” is a very generous/ myopic way of explaining away something that doesn’t add up.

Contact your mortgage lender and get statements and moving forward, take more of an active interest in your financial health.

They won’t have any equity if they’ve been on an interest only mortgage all that time?

my inlaws had an interest only mortgage for about 20 yrs. House was 40k, sold for 1.2m. Plenty of equity.

Good luck OP. Research this yourself so you are fully aware of what has been happening. Just in case your husband is being lenient with the truth.

How on earth do you intend to pay £203K in 8 years? Also interest rates are set to rise to 6% by the Spring?

I don't understand how in 20 years you've paid so little?

Agree with everything everyone has said. We borrowed £200k 16 years ago and that is now about £80k, paying about £850-900 a month.

I would suspect the ‘additional’ amounts added at each remortgage are higher than you are aware of.