Interest only mortgages.

I can't see anyone being let off from repaying the capital.

Interest-only mortgages can be a profitable way to finance a property - I know someone who bought a house around 15 years ago for 350,000 and has just sold it for 1.5 million. A healthy profit, particularly as for much of that period interest rates on the 350,000 were very low.

I suspect there are many people who took out interest-only did so because that's all they could afford at the time, with the hope that their finances would improve, or at least the property would increase in value.

Frank How can you say you have no sympathy for people who often through no fault of their own were sold these dysfunctional mortgages? Interest only mortgages were very common in the 70's and 80's when endowment policies were paying out decent returns. More often than not the policy matured with more than enough to cover the capital and everyone was happy. The problem arose when unruly mortgage brokers continued selling interest only mortgages well into the late 80's and 90's based on historical endowment figures and often knowing full well that the endowments would not cover the capital when it was due to be repaid. Of course the financial advisor or broker still got their payout from the selling of the policy so they didn't care did they? This became a ticking time bomb for many and was one of the first great mis-selling scandals in finance.

My husband and I were "sold" an interest only mortgage in the early 90's together with an insurance endowment that we were told would not on,y cover the capital but would leave us with a nice little nest egg. Within 2 years it became clear that this would not be the case and the insurance company asked us to double our endowment payment twice over to cover the shortfall. By this time we realised that there was a major problem and changed over to a repayment while we still had the chance.

In my opinion the ruthless brokers should have been taken to task long ago. I pity the poor people who find themselves in a desperate situation through no fault of their own.

gillybob so well posted,many people where taken in by these greedy financial advisors also the Building Societies whose loan to value was greatly inflated during this period and led to many many people losing their homes through negitive equity,I saw this first hand in the late 80s/early 90s when selling new homes and even though it was my living I used to worry that people where signing up for new homes that they could not possibly afford if one of them where unfortunate to loose their jobs.I find it very offensive to suggest that people are credited with having no common sense they had been blinded with incorrect information from the so called professionals of the time who took their commissions and ran for the hills.

Exactly Glammanana I fail to think what kind of situation my husband and I would be in today had we just let it ride until full term without getting out when we did. We were sold a policy of around £70 per month to cover a then £45,000 mortgage. Within a very short space of time the insurance company's predictions showed a maturity shortfall and we were asked to up the payment, which we did. Moving on a year we were asked to up the payment again which was when it kind of "clicked" that we should get out quick. Mind you at that time the insurance companies chose their words very carefully and on,y suggested that there "might be " a shortfall and "you might want to look at increasing payments" . I agree that around that time many people did take on mortgages that they could hardly afford (often they were encouraged to do so by ruthless lenders) which only exacerbated the problem.

Frank you never seem to have sympathy for anyone except yourself, so your attitude doesn't surprise me in the least. Well said Gillybob. I also had an endowment mortgage, sold to me as the sensible option, which I also converted to a repayment mortgage when I realised there would be a shortfall.

I think endowment mortgages come under the category of 'seemed like a good idea at the time', the time being when returns on stock market investments were generally much higher than they have been for the last 20 years.
We had a 15-year mortgage on our first house which we bought in 1970 for the princely sum of £1,750. The endowment payout did indeed repay the capital and provide a little windfall too.
However the 25-year mortgage we took out in 1985 with Standard Life did not meet expectations and produced only £19,000 of the expected £30,000 debt. We had plenty of warning from Standard Life that this would be the case and were in the fortunate position of having funds to cover this.
I don't feel that we were mis-sold this mortgage. Our attention was drawn to, and we read, the small print which clearly stated that the endowment might not be enough to pay off the debt.
But at the time this seemed highly unlikely. I do have sympathy with anyone who is in financial difficulty as a result of taking out an endowment mortgage, but I am not sure that all the companies which sold them were guilty of wilful greed. It was more a case of promoting a financial vehicle which hadn't been properly tested and caused a lot of misery when the wheels came off.

I distinctly remember being persuaded by the mortgage broker (attached to the estate agent) that the Endowment / Interest only was the way to go. It was sold to us in such a way they we couldn't lose and would end up with a nice little nest egg too. Yes we were lured by the low(ish) payments, but lets not forget these mortgages were not interest free and we still paid hefty interesting the capital borrowed. I do think we were mis-sold as we were not offered the other option. It was clear the broker had her pay off from selling the endowment in mind. I still we think we were one of the lucky ones as we realised early enough that this could leave us in a bit of a mess. I pity those who did not and are facing losing their homes as a result.

We had an endowment mortgage on our current house which was taken out in the 1980s. Luckily it was only a small mortgage and we were able to pay it off when DH took redundancy/early retirement in2008.
The endowment is due to pay out this September. We would have had approximately a £10000 shortfall.

We believed at the time we would end up with a nice nest egg. We certainly weren't daft enough not to realise that the capital would have to be payer.

We had an endowment on the house we bought when we moved north. Luckily for me it wasn't too long before our divorce settlement meant that this agreement was ended and I was able to take a straight repayment mortgage in my own name.

We too were talked into an endowment mortgage that would also give us a 'nest egg' when it matured. We were notified 10yrs in that it wouldn't pay out enough to cover the mortgage and we extended the term a little and changed to a repayment.
We then challenged the Company for mis-selling us the mortgage in the first place they agreed with us and paid us out a not insignificant sum which we were able to use for maintenance to the house. The process was simple and I was most surprised how easy it was I was gobsmacked at the amount they paid us for just writing a simple letter.

We were lucky, in that both our solicitor and the Building Society manager advised us strongly not to take out an endowment mortgage on our first flat in 1974. We moved our repayment mortgage on to the next 2 houses, and had to keep increasing the payments as the interest rates went up and up. The rate eventually reached something horrendous (17% at least) but after it started falling we kept the payments the same and so paid the mortgage off a few years early, which was just in time for student support! I do feel sorry for people who are not in a position to be flexible, either because payment plans have not done as well as expected or because they have ot had the pay rises they would have expected.

We had an endowment mortgage but it was covered by some sort of insurance. When that matured we paid it off.

In 1979 we could not get any type of mortgage other than an endowment. The house in London cost £38,000 and we took out an endowment mortgage for £18,000. The house was sold in 1988 for a mega amount, we were separating so I took out an ordinary repayment mortgage when I moved. There was still a little "nest egg" when the endowment mortgage matured, but not the amount that had been discussed. I have no regrets because there was nothing else on offer at the time. We, I admit were lucky but I have not forgotten paying 15% interest rates.

We converted our mortgage to an interest only one when my husband had to give up work. We had already used up his insurance for the twelve months he'd had off sick and were worried about keeping up the payments when we were on benefits. I just decided to worry about repaying the capital when the time came (in denial? Moi?) In fact we managed to pay of several lump sums over the last two years and are left with a manageable £1,000 to pay off now. Under normal circumstances I would never have considered anything but a repayment mortgage.

I get fed up of people saying that I should not be better off than a divorced person.
My wife passed away with cancer so the mortgage was paid off with the life assurance money.
Of course I get a widows pension from her occupational pension scheme and I have now inherited my parents house.

Frank

HUNTERF Do you walk about with a label around your neck with an enlarged version of your latest bank statement or what? How do these people who are, apparently, invariably carping about your so-called wealth know whether you are better off than a divorced person? And, in any case, which divorced person are they/you talking about? I wouldn't mind betting you're not better off than the late Princess of Wales following her divorce. When socialising, do you ever discuss any topics unrelated to money?

Interest only mortgages were our only option when we started out on the property ladder, we could not afford a repayment mortgage. We used them wisely though, we bought wrecks and did them up to sell at a profit enabling us to build up a decent deposit. It was hard work, we spend most evenings and weekends in a fog of dust, we had to learn how to do it ourselves as we could not afford builders but we eventually built up a decent deposit so we took a repayment mortgage and overpaid when the interest rates were very low. I think back to the days when my mum was paying silly interest rates I don't know how she did it. She did teach me financial awareness and am eternally grateful for that. No one gives you ought for nothing including an interest only mortgage!

HUNTER F I was not aware that you had access to my bank account. Do you dream about money?

What has "people thinking you shouldn't be better off than a divorced person" got to do with your comments about people having "half an ounce of common sense".
I am so glad my DCs have made it on their own without having to be dependent on their father and I,all the people you meet must know all your financial details for conversations that you mention to take place.

When my mum finished paying her mortgage, I persuaded her to sell the house, it was worth a heap by then. Move into rented and absolutely enjoy her life and the fruits of her labour, travel, our family is far flung. I certainly did not expect to 'inherit' her house Frank. You do seem to have an unhealthy relationship with money.An obsession even. My brother is a bit like that,he's much older than me and measures everything in monetary terms(I don't think he realises sometimes) even in everyday conversations.He's actually very mean although very wealthy.I think it affects his life, he has no spontaneity and often misses the moment.I find him incredibly boring and struggle to comprehend we're actually related.

I did find it rather unbelievable that apparently one in eight people didn't realise they would have to pay off the initial loan at the end of he term and had made no provision to do so. No insurance, no endowment policies - they were either relying on the value of the house having increased so much they would be able to downsize and buy a property out right or inheriting the money (like Frank!).

We had an endowment mortgage in the 70s but changed when it became clear the insurance policy would no longer cover it.

Once again Frank (or whoever you really are) you show compassion for anyone less fortunate than yourself...........Not

Have you ever thought of getting some cognitive therapy to help you overcome the obsession that you obviously have with money?