Ie. You should be able to hand the keys to a mortgage company and walk away debt free.
Likewise you should be able to return the car keys to a loan company and walk away debt free.
Sure, it would mean loans would have to have slightly higher fees to cover the increased risk, but as a nation I think it would be worth it for the productivity gains of not having so many of the population in court over debts.
That's already the case in the US for original mortgages. If you refinance your mortgage, you generally lose that benefit.
Also, it is really hard to sympathize with people walking away from huge loans for which they put down nearly nothing. The way things are today, you could severely overpay for a house with a loan that you put almost nothing down for, then walk away when the market crashes. That is not the kind of behavior that should be incentivized. As if that isn't bad enough, the very low down payments allow people to qualify for higher loan amounts, which drives up housing prices.
Is this not the case in the UK, or did the first guy in the article forgo that option?
maerF0x0•2mo ago
Lesson learned.
Be super careful who you open contracts with. Marriages are a coin toss. Would you put your total financial health up to a coin toss? Similar point about how much cashflow requirements you take on. (Can you pay the mortgage on your own? Are you ready to take on roommate(s) to fill your ex's place?)
remainder from the article showing this guy just failed to do the right thing:
> "I can imagine that customers are really worried and distressed if they're facing financial difficulty, but they don't have to go through it alone," Ms Hutchins said.
> "The earlier they get in touch with their mortgage lender, the more support and help that that lender can give them and the more likelihood they have of getting back up to date with their mortgage."
> Options offered by lenders, she said, included reduced mortgage payments to allow time to get back on track, budgeting and other tools to understand "their full financial situation" and advice about debt charities and support organisations.
thaumasiotes•2mo ago
Huh? That's a quote from a banking spokesperson. It's not even related to any of the (several) stories in the article - it's a quote she gave to the BBC.
Assuming that by "this guy" you mean the first guy mentioned in the article, he had an interest-only mortgage. So sure, he was overextended, but exactly how much accommodation do you think he was going to get? The second guy did have an accommodation with his bank (also on an interest-only mortgage), and it is... he'll be repossessed if he goes more than eight thousand pounds into arrears.
The first guy seems to have a legitimate grievance. He wasn't allowed to sell the home to cover the mortgage. Here's the way the article actually ends:
> As for Mr Da Costa Diogo, his bank has repossessed the property.
> In the same month it was repossessed, the BBC saw a similar three-bedroom property in the same Thetford street as Mr Da Costa Diogo's on the market for £160,000 - almost double the amount he owed.
throwawayffffas•2mo ago
Though if the repossession covers the remainder of the loan it's really not, they are going to be free of debt again.
Their credit score is going to take a hit which will make renting harder, but not impossible.
The first guy for example couldn't possibly hope to get a better outcome. He is no longer paying a mortgage on his ex-wife's house.
thaumasiotes•2mo ago
throwawayffffas•2mo ago
itsdrewmiller•2mo ago
marcosdumay•2mo ago
Interest-only mortgages shouldn't exist. They are predatory and the people that take them just don't have the discernment to make that decision.
(I'm honestly surprised that they exist at the UK.)
maerF0x0•2mo ago
bdangubic•2mo ago
maerF0x0•2mo ago
The point is interest only loan is Renting + Equity Exposure. It's a good move if you are experiencing the price appreciation growing faster than your downpayment. You can enter the market price exposure before you get priced out. And if you're right about the direction it's heading you can make money (relative to renting) so long as your outflow is similar to renting (across the time span, rents go up...)