Parents in Law Have Been on Interest Only Home Loan for Fifteen Years

LMixinitup on 29/03/2019 - 19:58
Last edited 29/03/2019 - 22:53 by 1 other user

Hi all.

Hoping some of you might be able to assist. Was talking with the in-laws today and was surprised to hear their mortgage repayment was nearly as much as ours. They aren’t too far off retirement but still have a large amount on their homeloan. They have been on a interest only portfolio loan for over 15 years with no reason for this type of loan that is charging them over 6%!

It was setup by a mortgage broker back in the day I wonder if they have any right of claiming against the obviously bad advice and if the bank held any responsibility? Where could we go to find out? Appears the season the banks are getting a kick in the backside for all their ripping off of naive customers.

Financial

Comments

  • whooah1979 on 29/03/2019 - 20:04
    +13

    They're free to shop around.

    • Mixinitup on 29/03/2019 - 20:08
      -7

      Yeah they are going to pay it out at the end of year when they can access their super.

      • Mixinitup on 29/03/2019 - 22:32
        +1

        Not sure why the neg if they are at retirement age where are they going to get a safe return on their money at 6%? Closer to retirement you should be invested in low risks assets

  • JimmyF on 29/03/2019 - 20:09
    +19

    I wonder if they have any right of claiming against the obviously bad advice and if the bank held any responsibility?

    hahaha everyone always looking for someone else to blame for their mistakes.

    Your parents could have looked at/reviewed their mortgage at any time in the last 15 years….

    is charging them over 6%!

    Well it would have been going up/down, as the interest rate hasn't been 6% for the last 15 years.

    • Mixinitup on 29/03/2019 - 21:07
      -1

      Not looking for someone to blame per day but if you pay for financial advice and it’s not in your best interest (notice the pun) surely there is some recompense

      • JimmyF on 29/03/2019 - 21:40
        +3

        Not looking for someone to blame

        Kinda sounds like it.

        but if you pay for financial advice and it’s not in your best interest

        But what did they ask for though? Maybe they got it.

        surely there is some recompense

        But they had 15 years to review the advice and choose something different if its wasn't still valid for them. They failed to do so.

        They also failed to review the yearly statements or question why the loan capital wasn't going down.

        While it might not have been great financial advice to begin with, your parents have had 15 years and they have failed to review anything in all this time. basically asleep at the wheel.

        • Mixinitup on 29/03/2019 - 22:34
          -4

          Maybe they were given the right advice and that may well be in fact the case. What I was looking for was a way of getting that advice reviewed. Yet another non helpful IT response

          • JimmyF on 30/03/2019 - 08:51
            +9

            @Mixinitup:

            What I was looking for was a way of getting that advice reviewed

            Thats not what you asked for.

            If you want to get it reviewed, then do it. Stop asking about claiming for 15 years of your inlaws not bothering to review their loan, its not the banks responsibility.

            So go speak to a bank/loan advisor and get a new loan or just wait and pay it out of their super. Which I'm guessing was the inlaws plan all along, hence why on interest only payments for 15 years. But sure sure, it was someones elses fault.

            yet another non helpful IT response

            said by another entitled 'not my fault' generation. Just because you don't like the advice, doesn't mean it doesn't apply. Your inlaws had been lazy, simple as that.

            • Sxio on 02/04/2019 - 20:28

              @JimmyF: Wow Jimmy. With an attitude likes yours, people might not enjoy your company.

              It costs you nothing to show some empathy.

              • JimmyF on 02/04/2019 - 21:32

                @Sxio:

                It costs you nothing to show some empathy.

                It also would have cost them NOTHING to review their loan over the last 15 years.

                Appears we both did nothing hey? My empathy matches their involvement in the loan.

      • Diji1 on 29/03/2019 - 21:41
        -3

        The financial services industry was loosely regulated up until a few years ago and they defrauded millions of people like unregulated business usually does.

        Most of Australia's workers are still losing more than half of their retirement to bank fees because of the Governments shitty loose regulation of superannuation which is where the Government steals 12% of your earnings so that banks make $15,000 in fees which loses them over half of their retirement compared to paying no fees.

        And idiot drones will tell you that no fee superannuation is impossible, like the industry told them so, despite no fee funds being a staple for more than half a century for people that know what they're doing.

        • JimmyF on 29/03/2019 - 21:54
          +5

          Most of Australia's workers are still losing more than half of their retirement to bank fees

          Ummmmm yeah no. Min wage is Australia is $719.20 a week, of which 9.5% is super. So $68.32 or $3552.85/year goes to super.

          You do NOT pay $1776.42 in 'bank fees' each year as claimed.

          And idiot drones will tell you that no fee superannuation is impossible

          Well there has to be FEES somewhere in the system…. There are wages/bills to be paid etc

          despite no fee funds being a staple for more than half a century for people that know what they're doing.

          No such thing….. See above, wages/bills. If the fund is handling your money, they are making money from it somewhere to pay THEIR costs/wages etc

      • SnoozeAndLose on 29/03/2019 - 21:59

        Did they pay for the advice? i think broker is free just they got commission from the bank

  • Doggiie on 29/03/2019 - 20:10
    +8

    How are they being ripped off? They accepted to take the loan sadly.

    Time to move on and (hopefully) refinance if some banks would want to take them.

    • Mixinitup on 29/03/2019 - 21:09
      -3

      They accepted someone’s advice we all will rely upon someone’s advice at some point and those that give it should be providing the correct advice. Isn’t this what the whole royal commission was about?

      • JimmyF on 29/03/2019 - 21:44
        +2

        should be providing the correct advice

        Why wasn't it correct advice? What did your parents ask for? Maybe they asked for the cheapest monthly loan repayments aka interest only loan.

        Isn’t this what the whole royal commission was about?

        No it was more about offering loans to people who couldn't afford them.

      • MrBear on 31/03/2019 - 12:40
        +2

        A mortgage broker is not a financial adviser.

  • TheBilly on 29/03/2019 - 20:15
    +3

    How do you not look into this in a 15 year time period?

    • Mixinitup on 29/03/2019 - 21:10

      Old people, naive weren’t raised in the world of the net and good financial management

      • JimmyF on 29/03/2019 - 21:35
        +2

        Old people

        Old people? It was 15 years ago….. Lets say your folks are 65 today, means they had been 50 when they took it out. So not really that old.

        • brad1-8tsi on 01/04/2019 - 13:04
          +1

          Agree. In your 40s-50s you should be at the peak of your financial intelligence.

          I know so many people in that age group that know they can get a cheaper mortgage; superannuation with lower fees; have 5 superannuation accounts or simply stick with the same energy company or auto renew their insurance every year because anything else is "too hard".

          I try to help and educate but their eyes glaze over and they CBF.

          • futureminime on 04/04/2019 - 11:28

            @brad1-8tsi: I see both sides. It is easy to be competent yourself and have a natural aptitude or education in the area and preach about how everyone should be able to deal with it. There are billions in dollars in scams every year targeting people from a whole variety of levels of education. People can and do get overwhelmed. People can and do take advantage of that as with any sale opportunity.

            I think the main thing is to teach people to get a 2nd quote and a 2nd opinion. Ask more questions and don't take people word at face value.

            Age is only an indicator of experience and resilience. If you've never had those financial interactions before or if English isn't your first language you can really be taken advantage of.

      • TheBilly on 30/03/2019 - 01:41
        +1

        I disagee. Mortgages werent created yesterday.

  • 87percent on 29/03/2019 - 20:15
    +1

    Yeah, no hope… It's like I found out my parent's in law, were paying someone to manage their iPhones. And by manage, I mean download apps for them!!! This guy had a pretty smooth operation going (this was in Singapore), he would basically go to each apartment block once a week and download apps for all the old people

    • bloom on 29/03/2019 - 20:19
      +1

      Turn off auto updates and charge for them 😅

    • JimmyF on 29/03/2019 - 21:47
      +1

      I dunno…. Lots of old people don't know how tech works and are happy to pay other people to 'do it'. Yes I agree for those that known how to do it, its crazy, but then I do IT support, so I'm really no better fixing other peoples issue they don't know how to fix themselves.

    • outlander on 29/03/2019 - 22:21
      +2

      Not a bad idea. I'd pay someone to manage my apps.. if they actually did a good job of it and found me apps that actually work.

    • p1 ama on 29/03/2019 - 23:14
      +4

      How is that not a legitimate business? It's no different to people bringing their cars to a mechanic because they can't manage their cars themselves, people calling in plumbers because they can't fix a leaky tap or people calling tech support because they can't fix their own stuff. He's providing a service that people are happy to pay for.

  • Cheeper on 29/03/2019 - 21:28

    I have known more than one person who went along happily paying their mortgage at an inflated rate for many years, some for over 15.
    When it was explained to them how much better options were available and they could change to one without penalty they were amazed.
    When they were shown how much money they had wasted they were less amazed.
    Many people are doing similar things and not just with mortgages.
    It is natural to want to do something about the lender but in reality they only have themselves to blame.
    It is a shame they will be wasting their super to pay it out, maybe they are not fully aware of how a good super fund can be of benefit to them?

    • Mixinitup on 29/03/2019 - 21:58

      Yeah I think the fact the big banks are still reaping in big profits and Woolworths is raking it in aswell indicates there is plenty people paying overs for effectively the same thing. I have known they were with st George but can’t understand why they would have been put on portfolio loan and not a standard variable rate product. They have no interest in any portfolio be it shares or other investments and believe they were probably out on the product to maximise the brokers commission. That’s what I think may be worth investigating they would be okay with continuing to pay what they are on but I know at some point in their life they may need that extra money. If there is no recompense that’s fine we have started a financial plan with them just worth asking the question if there is an avenue to investigate.

  • [Deactivated] on 29/03/2019 - 22:15

    I am sorry to hear about your parents getting taken for a ride. Plenty of people (not just old) don't understand complex financial products, and unfortunately I doubt there is any recourse you can have.

  • p1 ama on 29/03/2019 - 23:12
    +6

    Appears the season the banks are getting a kick in the backside for all their ripping off of naive customers.

    You're making this sound like it's a good thing. It's a horrible thing. I purchased a property just around two years ago, some of my mates are entering the market now and having a holy tough time with loans. Lending criteria have tightened significantly and every detail is being examined before loans are being given. I know responsible and successful people denied loans in recent months especially if they are a business owner or earn income in any other way than standard employment.

    This is completely and utterly the fault of irresponsible idiots who do not know how to manage their own money and end up looking for someone else to blame. How about people take some personal responsibility, learn about things they're getting themselves into? At the end of the day, you have to look out for yourself.

    • Ozpit on 30/03/2019 - 13:19
      +2

      This^. Exactly what my financial adviser buddy tells me. He’s been in the industry for around 25 years and says that ultimately it wasn’t the behaviour of the banks that led to the Royal Commission but the idiocy and lack of financial nous of their customers for accepting bad financial advice.

      And now, because of the Royal Commission, the whole financial industry is on the back foot and had to tighten up, and it’s the poor Jack and Jill on the street who’s copping it more than anybody because they can’t get a measly loan for their first house or start-up.

      And it’s all the fault of those idiot customers who accepted crap advice from the professionals when they should have known better.

      My financial adviser buddy reckons the Royal Commission should have been an investigation into the financial stupidity of the banks’ customers, and not the other way around.

      • [Deactivated] on 30/03/2019 - 16:34
        +8

        If I choose to buy something and I cannot afford it, it is completely the banks responsibility to stop me from signing the contract of sale and refusing me a loan.

        By approving my loan, the banks have effectively enabled me to contribute to this financial bubble and the damage extends beyond just me. Society also pays as you have described above.

        You cannot expect a policy that targets individuals to actually work. There are a lot of people who take loans and a lot of people are not privileged enough to have received financial education. It is much easier and therefore more effective to control the problem at the choke point - the banks.

        After all, the banks are only there to make money and they're making enough money. If they punish the victims of bad loans, it would mean punishing a lot of people.

        (How did I do?)

        • Ozpit on 31/03/2019 - 00:03
          -3

          You did well. You’re quite correct in describing banks as the ‘choke point’, where (metaphorically speaking) they deliberately choke those of their customers who, because they have no financial nous of their own, willingly accepted their bank’s poor advice and now find themselves in a dire financial predicament. They have no one but themselves to blame.

          But what’s worse (as you rightly say) it is the wider society who is now paying for their stupidity.

          It’s not the bank CEOs that should be going to jail, but their foolish customers who refused to educate themselves on how to invest wisely and blindly accepted what the banks told them.

          Nothing will straighten out the banking system until some people do some real jail time. And those people are the customers who now cry poor because of their lousy investing. Don’t blame the banks.

          • [Deactivated] on 31/03/2019 - 00:05

            @Ozpit: I can't help picturing Oprah.

            You go to jail, you go to jail. Everyone goes to jail!

            • Ozpit on 31/03/2019 - 10:36

              @[Deactivated]: Except we few - the wise, the guardians of ethics, the knowers of truth, the fighters for justice and the wizards of finance … p1 ama, where are you?

        • Typical16-bitEnjoyer on 02/04/2019 - 10:54

          @tshow Very well said.

  • try2bhelpful on 30/03/2019 - 00:35
    +2

    There should be a written advice on the home loan. 6% wasn’t a bad loan back 15 years ago. However, I thought interest only loans where mainly for investment properties. The bigger question is why wasn’t the loan reviewed for all those years. Do they have a financial planner?

  • ihbh on 30/03/2019 - 08:18

    Appears the season the banks are getting a kick in the backside for all their ripping off of naive customers.

    The banks, and any business for that matter, assume that their customers are knowledgeable and not naive; otherwise they would be condescending. How could they know your in-laws are naive? Do they go around with a sign hung around their chest saying so?

  • 82norm on 30/03/2019 - 14:06
    +1

    A mortgage broker is NOT a Financial adviser, as such they provide different services. At the end of the day, the responsibility does lie with your in-laws. Surely, after even 5 yrs when they didn’t notice a drop in their mortgage they should have started asking questions and raised alarm bells? Not to be offensive, but is english their first language? Why didn’t your wife query this with them? Normally an interest only loan is set for 3 -4 yrs and then goes to PI. Who knows, maybe they were not in a position for a PI loan and hence interest only was the only option.

    Unless they can pay principal and interest, I wouldn’t approach the bank. I’d be surprised if they’ll cut any slack and then introduce PI on them. Unless they have funds to pay for it, help from family members, excluding using their super, I’d leave it be. The sad thing, they won’t ever own that property, unless it has gone up in susbstantial value, they sell it, pay back what’s owing and buy something else.

    Do nothing, and when they pass away and the bank will get first dibs, and anything left over goes to the estate, unless someone is willing to take on the debt. Not to be crass, there may be no inheritance in the end.

  • ELH05 on 01/04/2019 - 16:11

    It's a shame that this has happened. Hopefully they have a lot of equity in their property now or a lot of money in their super that will assist paying the debt off at retirement. Can they sell the property and downsize and be mortgage free ?

  • cashless on 02/04/2019 - 13:36

    What a waste of all that tax free super - giving it to the bank to pay off a loan.
    i Feel for your in-laws

  • cloudy on 04/04/2019 - 03:10

    Wow, a lot of fingers pointed everywhere, from banks to advisers to RC to even Woolworths mentioned lol.

    Put simply, when you enter into long term contracts and you don’t review it in 15 years it’s very very unlikely it’s gonna be a good result.

    If you don’t take any interest in your purchase it’s hard to imagine you have made a good purchase. And like any on going purchase, everyday it costs you, everyday it’s a purchase. Some review bills yearly, I go as far as half yearly.

  • NoPetNoKid on 08/04/2019 - 14:09

    Is this loan with ANZ by any chance? I heard that ANZ is doing the re-amortization for such cases and refunding the money to the customers.
    By such cases, I mean, if the loan has been in IO for more than the agreed IO period.
    Not sure about other banks but for ANZ just raise a complain.

  • tess1988 on 26/07/2019 - 00:30

    How much did they buy it for?
    How much is the loan for?
    How much is it worth now?

    Even so they haven’t paid back a cent of it it’s probably not that bad and it’s better then renting so just pay it out with there super

  • suti on 27/07/2019 - 15:29

    When will people learn that mortgage brokers are not financial advisers. The Royal Commission recommended mortgage brokers be forced by law to act in the 'best interest' of their clients, however the industry has been fighting tooth against this. You have got to ask yourself why?

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