Interest has risen on my mortgage repayment because I am paying interest only

[Wishes]

Any thoughts would be more than helpful please.

I was informed by my mortgage provider that the interest has risen on my repayments due to the amount of exposure I have yet to repay. I am currently only meeting 70% of the interest.

My question is, can they legally do this?

 

[rameire]

if you are only paying 70% of the interest charged on the account then your balance is rising by the other 30% every month, hence why the interest is going up.

 

[wbbs]

Do you mean they have increased the actual interest rate because you are not paying the full amount?

Is it loan on your principal residence or buy to let?

 

[Alwyn]

During the eighties and nineties many mortgage customers were sold endowment mortgages where they paid interest only and took out a separate policy to pay off the capital at the end of the mortgage term, many of these policies turrned out to be loss making entities.

Only today I was doing some research on this very topic. I am in a very tricky position at the moment, am tied into an endowment mortgage but did not take out a separate policy to pay off the capital at the end of the term.

 

[Alwyn]

Alwyn and Wishes

Out of interest did the banks give you your interest only mortgages without first ensuring you had a repayment vehicle in place to pay offf the capital at the end of the term? If not could this not be described as mis selling?

I think in the boom years Mortgage companies doled out interest only mortgages like smarties on the premise that house prices were going to carry on rising over the years and increase in wages etc would ensure that customers would be well able to pay off the capital at the end. It hasn't turned out like that...........

Hi Cashier,

The only vehicles that was insisted be put in place were home insurance and a life policy. This policy only covers the bank if I happen to pop my clogs before the final payment.

From what I recall, I paid a a very large chunk of interest (quite large even for the boom) per month along with a small amount of capital, this was the agreement upon signing the contract.

I do remember being advised by my solicitor to keep well clear of such a mortgage but of course stupidity on my part and believing house prices would rise were unfortunately my downfall.

As previously mentioned, like the OP I now cannot meet the full interest on the mortgage and my bank have insisted that I need to pay full interest or they will seek repossession.

 

[Wishes]

Cashier, in my case I have an annuity home loan.

 

[wbbs]

Wishes, has the lender increased the mortgage interest rate or are you just paying more interest because you are not meeting the full interest payments?

 

[Bronte]

Cashier, in my case I have an annuity home loan.

So you have a regular home loan wherein you pay interest and capital, with interest being very large at the beginning?

How many years have you been interest only? Are you in negative equity?

 

[Bronte]

I am in a very tricky position at the moment, am tied into an endowment mortgage but did not take out a separate policy to pay off the capital at the end of the term.

How is this an endowment mortgage if you don't pay a into a separate policy. Surely it is just an interest only mortgage? But even this doesn't make sense as you mentioned that you think you paid some capital along with interest at the beginning.

On a separate note, endowment mortgages were popular for a time about 20 years ago, I thought in latter years they were no longer sold as they were a very bad product.