Interest only mortgage, paying too much for four years :(

[ladybirdm]

Hey, so I've just found out that because I didn't rearrange my mortgage four years ago (yes I feel very silly now) I've been in i high interest and could of been pay over £300 less. I had absolutely no idea. It came down when interests came down so thought it was as low as it could go..... (yes, I know I'm silly)

So I'm asking.... with a energy supplier has an obligation to advise about correct taffiffs, are money lenders not obliged to inform you of how much money we could save?

I feel so sick. The times we struggled to pay and it could of been a 1/4 of what it is...

I you have read this and you are out of your term CHECK YOURS!!! If your are on interest only look at the rate not at the repayments, as these tend to be for repayment mortgages..... #just saying

Xxxx

So you've been paying svr? If you came out of a fixed rate they should've written to tell you but they're under no obligation to automatically give you the lowest rate they offer. Usually you have to pay a fee to get the low fixed rates.

No. Adults have a responsibility to check these things. You would have received a letter when your fixed rate came to an end. We need to take responsibility for our own decisions and not expect to be "told".

Jeez Agent. I don't necessarily disagree with the sentiment but you could have worded it a little kinder. She knows she's fucked up, you don't need to ram the boot in.

Unfortunately whilst they are clearly a bit of an ass, Agent is correct that the bank/mortgage provider will not help you out of this as it is your duty as the mortgage owner to ensure you're on the best tariff for your circumstances.

Best of luck Hun x

Oh how awful. It's the way the modern world works unfortunately. Suck people in with short term deals in the hope that they'll not bother to change at the end of the deal and pay a high price afterwards.

You just have to regularly review everything (utilities, insurance, mortgage etc etc). PITA but the alternative is often throwing money away.

Also, you say you have an IO mortgage - you do have a repayment strategy in place???

Sorry - Userwhatever is right. My tone was too harsh. Probably as a consequence of dealing with an issue in a voluntary group I'm involved in where people were complaining that I hadn't contact them all individually to passin some information (they all have acccess to the group's FB page)

Barb. Makes a great point.

Do you have a repayment strategy in place?

I would suggest a whole of market broker who will take this through with you. Many would say now is the time to get a long term fixed product on a repayment basis.

I/O mortgages server a great purpose but can be a ticking time bomb without understanding or a plan.

Sorry but what everyone has said is right - if you are adult enough to have a mortgage you're adult enough not to just pay the SVR, that's a crazy thing to do

but more worryingly, how are you going to pay off the capital?

Thank you for the responses. Thanks for your concern but as our curcumstances have change since getting the mortgage (I'm a stay st home mum) you cannot go onto a repayment without remortgaging.. which we don't qualify for anymore... so now will now overpay which you can do upto 10%

I just so disappointed with myself and I truely think the code of conduct should change. As the energy companies are regulated....

how should it change? they already write to you at the end of a fix. what more can they be expected to do? as an adult it's your decision whether to pick a fix, tracker etc.

If you haven't actually checked with your lender if you can change to repayment then I would. You can without remo but dependent on lenders policies. You may now be able to pay over 10% as out of fixed period.

You most likely was sent a letter at end of fixed period saying so, at very least a dd amount change letter.

As a country the low level of financial understanding is a concern and I would suggest this starts from little to none education in school. But we as consumers need to take responsibility too for our lives which includes our financial affairs and opening letters. We can't expect someone else to tell us / remind of everything.

If you haven't actually spoken to you lender and a broker about options then I would. If you have spoken to your lender and broker and they have said to you about this then I appreciate the frustration for the situation. I hope you can get something sorted, it is annoying knowing you could be paying less but not be able to do it.

But when you take out the deal your told it is fixed for 2 years or whatever and then will change to X amount. You know it's coming so why not phone your provider at that time and see about switching your deal?
You'll know for future I suppose but the bank has lent you a massive amount of money they want their return somehow and it may not seem it now but it is ethical. You get the deal you sign up for, if you pay an arrangement fee you usually have more flexibility in overpayment and getting out early etc but it's all in the terms and agreements that you'll have been sent when taking out the policy

I don't want the law to change and over regulate things that people can check in SECONDS for themselves, online.

I don't want my bank to be legally compelled to churn out a letter every 6 months with some officially sanctioned wording "remember there may be cheaper rates elsewhere" because I'll pick up the admin charge for that in the mortgage cost. I'll also pick up the cost of their increased liability because as soon as you regulate that there'll be people wanting payback for not reading the letter properly

And in any case, I bet most of the people who aren't aware of their rate relative to the market won't read the letter anyway. Or act on it if they do read it.

I have everything sympathy for that gut wrenching feeling of making a mistake that cost you money.
But not supportive at all of your view that it should be anyone other than the borrower who should be responsible.

Will the bank do you a new deal? We weren't eligible for remortgage as negative equity and not great wages BUT the lender we were with were happy to put us on a new fixed rate for 3 years interest only.

I don't want my bank to be legally compelled to churn out a letter every 6 months with some officially sanctioned wording "remember there may be cheaper rates elsewhere" because I'll pick up the admin charge for that in the mortgage cost. I'll also pick up the cost of their increased liability because as soon as you regulate that there'll be people wanting payback for not reading the letter properly

this.
you can't regulate for people being a bit dim

No, the lender sends you a letter at the end of the fixed-term and probably sends you an annual mortgage statement as well - they have no obligation to let you know their cheapest rate.

How are you going to overpay on an interest-only mortgage? Doesn't the balance remain the same all the time, and do you have an endowment policy or any way of paying the capital back at the end of the loan?

And of course, lenders have their rates on their websites so they are available to you any time OP.

Do our understand that there really isn't a "cheapest/best" anyway, with mortgages? It's too individual. That's why I had a one hour phone call with my mortgage company to remortgage - to be told that yes, in the end, the best option was the one I already asked for.

I am on an in house variable rate, much lower than usual SVRs, but not fixed in any way.

There are other mortgages that are cheaper interest rate with the same building society. A computer letter would say "you are on 1.58% Flexx Offset you could be on 1.4% Non Offset Fix".

Hmmmmm. Yeah, I could.

• I couldn't give a rat's arse about the risk of not fixing because my large savings will pay off my mortgage tomorrow if interest rates go crazy

• I'm about to put a load of those savings into the offset so I'll be paying 1.58% on a small balance instead of 1.4% on double the balance. Computer can't know that.

• for some years I was on a reversion SVR that made it look like I'd not read a newspaper in 5 years, it was so high! But I had a court order for my XH to pay the interest for x years, so even a low cost arrangement fee would have cost me more than it saved. Ain't no computer algorithm going to pick that up!

So you see, unlike energy supply, it's all a bit more complicated.

Which is why all a company could really do is send you a letter saying "there may be cheaper rates, we can't say which is best for you in this letter, all rates are detailed on line". Which if you can't work out without a reminder letter, you shouldn't be doing grown up things like buying houses in the first place!

Letting it slide for ages not realising it could be cheaper? Happens even to grown ups. Life is busy.
But putting the responsibility on the lender? That's for kids.

If you're interest only, overpaying is not the way to go. You'll end up finishing the i/o bit early and having to find the money for the capital bit ahead of schedule. Better to find a long term savings plan and pay into that - but make sure it's flexible enough so that if/when interest rates go up you can divert money if you need to.

OP I'm a bit concerned that if you are struggling sometimes to pay the interest only mortgage how will you repay the capital at the end of the mortgage period? It may be donkeys' years off, but not long if you have to get that money together.

Do you have a vehicle or plan to pay back the capital?

If not you do realise that if you cannot repay the capital ( or remortgage to repay it) you effectively do not own your house and may lose it.

If you're interest only, overpaying is not the way to go. You'll end up finishing the i/o bit early and having to find the money for the capital bit ahead of schedule

Incorrect. Interest is payable for the entire term, certainly while there is money outstanding. Say the OP owes £100k and the interest rate is 4%, she has to pay £333 in interest every month. If she pays extra, that's a capital repayment, which reduces the balance.

It also has the advantage of reducing the interest charged. Say the OP makes a one off payment of £1k, the next month, interest will only be charged on £99k, so will only need to pay £330 interest.

Better to find a long term savings plan and pay into that - but make sure it's flexible enough so that if/when interest rates go up you can divert money if you need to

Whether it is better to repay capital or save up separately depends on the interest rate (the OP says it is high, so unlikely that she will be able to beat it with a standard savings account) and also the rules of the mortgage - not all allow overpayment, but most do - the OP says she is allowed to overpay 10% and plans to do so - this sounds like the best plan. There's also the option of investments, but that carries a risk.

If her interest rate was very low (some are paying well under 1%) it is better to save separately as you can easily get 1% on savings and often a little more.

This has the advantage that the money is available for other things (we financed our extension this way - saved up using money available because our mortgage has gone down so much because of interest rate drops - if we had overpaid, we would have had to borrow the money back at a higher rate). Of course you have to be disciplined and not spend the mortgage money on trivialities.

and I truely think the code of conduct should change

I like the idea of extending this to all situations where prices might vary. For example, in a supermarket, mandating that the price ticket 'clearly' lists the prices this item is available for, in all other retail outlets.

You say yourself unless I've misunderstood that you wouldn't hVe been able to change to a repayment anyway.. so don't beat yourself up.

I don't agree it's the banks issue. You signed a contract for a fixed deal for however long that would revert to the bmr/ Svr. If you didn't understand what you were signing you never should have signed

If you're out of fixed rate you can normally pay off as much as you like without penalty.

My interest only mortgage came out of fixed rate at the beginning of the year and has gone onto SVR, however I looked at the options, and we would have had to have signed up for another 3 years contract with repayment penalties, and we're expecting a windfall soon which would allow us to pay off a huge chunk, so I did my sums and decided it was better to be on the SVR and be able to make a big payment by the end of the year, rather than lock us in for another 3 years for a lower rate.

Every 6 months or so I do a sweep of our finances, what money is where, what we're getting/paying for it, what we're expecting in over the next few months and what we're expecting to go out - helps me keep a handle on it all.

We had interest only and made lump sum capital repayments, as PP said this bought down the interest paid monthly and didn't change the end date.

We had interest only and made lump sum capital repayments, as PP said this bought down the interest paid monthly and didn't change the end date.

The mortgage provider will always prefer to do it this way. Have a look at how much interest you save by reducing the capital to be repaid, while keeping the monthly repayments the same. You save a massive amount of interest over be term of the mortgage.