100 % Interest Only Mortgage Want to Convert to Standard Repayment

[theoldrouge]

Thank you for your reply.

They have paid off most of their other debts now so higher repayments would not be an issue. Its more will a lender allow a conversion to a full repayment.

 

cant see any problem at all with this, the lender will welcome the issue being addressed

[theoldrouge]

I would have to disagree with theoldrouge on this - dependent on who the lender was. Most of these loans would have been provided by firms such as lehman brothers (southern pacific in the uk) and as such packaged up and sold into an spv within months (lookup eurosail on google for various prospectus). As such all you are paying is the administrator, capstone, etc so you're chances of getting it altered are pretty much nil.

If you read one of these prospectus its clear that there was never any intention that these loans were/are expected to run the entire term but that they would all be liquidated, by whatever means, years before.

 

interest only mortgages were provided by nearly all mainstream lenders at that time

[theoldrouge]

as from 1/4/2014 all regulated lenders Prime and subprime must comply with PRIN,principles for business FCA

 

to ignore a customers request to put in place a repayment strategy over the existing term of the mortgage

 

would be not only a breach of PRIN, but also of Mcobs

 

the OP should read the FCA Themeatic Review of Interest Only Mortgages

 

http://www.fca.org.uk/static/documents/guidance-consultations/gc13-02.pdf

[theoldrouge]

If the interest rate they have at the moment is acceptable to them, they could just check with their current lender if there are any restrictions on making over payments to the mortgage loan account. If there aren't, they can just make higher monthly payments to the account (ensuring that they request, on a regular or at least on an annual basis that any prepayment balance is used to reduce the capital, some lenders will do this automatically some don't, it will also depend on your mortgage product).

 

This will mean that the interest will be paid and additional sums paid will reduce the capital, in a similar way to a repayment mortgage.

 

Personally, I would speak to the existing lender and sound them out a little. After all, your friend is not looking to apply for a new mortgage, they just want to convert their existing mortgage from an interest only to repayment - there is no additional risk to the lender as their exposure (the amount borrowed) remains the same

Agree with this as there seems no mention of applying for a new mortgage

 

On existing mortgage the FCA guidance provides for either strategy

[theoldrouge]

no ones advising a better deal,no ones advising a new mortgage, merely to put a repayment strategy which they can afford, in place with their existing lender., within the term of the existing mortgage

 

read the FCA guidance