Wednesday, 8 October 2008

Over A Barrel At The Bank

We got our mortgage statement recently. We thought they'd made a mistake. It showed we only owed a relatively smallish amount of money, in comparison to the relatively huge-ish amount we used to owe. How time flies when you've got a mill-stone around your neck. We looked at each other and said "Blimey, shall we pay it off and be done with it? We could save ourselves a fortune in interest". This would however involve raiding the piggy bank, big-time, living on curried dust and wearing our children's cast-offs but we'd both read in the financial papers that the best way to survive the current hideous financial turmoil is to pay off as much debt as possible, spend as little as possible and avoid paying anyone any interest if at all possible. It seemed like maybe this was a Good Plan.

"Hello, we'd like to talk about paying off our mortgage" we told the advisor at the bank. We waited for a fanfare, fireworks or a twenty-one gun salute. We'd even have settled for a round of applause. I thought they'd be thrilled to get some money back in their coffers in view of the current financial climate, but no, nothing. In fact, if anything, she looked very unimpressed. "In one go, completely, totally finished" I added, just in case she hadn't understood. She sighed.

"Yes, you could do that" she said, "but it'll cost you about £400 in penalty fees for ending your mortgage early and £50 for us to send you your deeds." Fifty pounds to send us a few papers?? I wondered where on earth they were getting their stamps.

"Oh, that seems a bit mean doesn't it" I attempted a bit of light-hearted humour, "the bank charging us to give them their money back to them? What about if we just let the mortgage run on, and continue to overpay, how much interest would we be charged until the end of the term?"

There was frantic jabbing at the calculator. "About £400 give or take a few pounds. And of course £50 to send back your deeds."

Of course.

"So, let's get this straight. If we give you back several thousand pounds of the bank's money, they'll charge us £400 for doing it. If we don't give it back all in one go, and continue monthly payments, you'll charge us £400 in interest for doing that."

"Yes," she said "that's correct."

Undaunted, we tried a different approach.

"Could we change to a different mortgage then, with a lower interest rate?"

She nodded. "You could, but there is an arrangement fee for changing to a different mortgage product."

We were ahead of her here. "And how much is that fee?"

Yes, you guessed, it was £400.

So in summary, if you pay the bank back, it costs you money. If you keep the loan going, it costs you money. If you try and overpay to finish it off a little bit early, it costs you money. And if you try to save yourself a bit of interest by switching to a lower rate "mortgage product", it'll still cost you money. And don't forget, when they've finally wrung out all of the money you think they're going to get from you, the first edition Penny Black stamp they buy from Sotheby's to post your deeds to you will cost you the rip-off sum of £50.

Banks, eh? Just institutions whose mission in life is to find as many different positions as possible from which to screw you, whilst at the same time pleading poverty because they've all paid themselves too much in bonuses for pissing your money down the drain.

No wonder we're all over a barrel.

20 comments:

Daisy said...

It definitely sounds sensible to have the weight off your mind. But what a nightmare- you're damned if you do and damned if you don't! They should be glad you're not making a run on the bank and stuffing it all under the mattress!

laurie said...

congratulations for getting so close! and yes, the banks will get their money out of you one way or another.

the only good reason for not paying it off is if you can deduct the interest on your taxes (as we can in the US). it's a nice little tax break.

if you don't get that, i say go for it! curry dust isn't all that bad...

Grumpy Old Ken said...

Hi

I'm a lot older than you and still know nothing re banks. A year or two ago I was an executer for an aged aunt. In the TSB one day the bankclerk was looking puzzled re his screen. (we couldn't see its contents.) It turned out there was £40,000 unaccounted for. I wonder what would have happened if we hadn't been on the ball. Mind you, they still managed to lose thousands by bad management before we noticed on another occasion.
Love your blog. Hope you find time to view my paltry efforts. I'm very much a novice.

Ken
www.grumpyoldken.com

Mean Mom said...

Get out of that, then! You can't can you?

Am I the only one old enough to remember Morecambe and Wise? Oh! (Sigh)

Sorry about your predicament. We are struggling a bit, at the moment, with youngest son at university. We decided to dip into our savings and pay off the bit of mortgage we had left. I'm beginning to wish that I'd had my children a bit earlier in my life!

Great to have a post of yours to read!

Miriam said...

Hey, welcome back!I never believe in paying back loans if you can avoid it,and you've certainly confirmed that belief, may a s well hang onto your money and go on another holiday, a good one this time! In case you're not convinced,here's one more reason. You're supposed to keep those deeds in a v safe place, not in your house.The bank safe keeping facility will keep them for you after you've paid off the mortgage,and guess what..they charge you for it!! Probably about £400! Spend on, lady! Mimi

Swearing Mother said...

Daisy hi! I thought they'd like some of our cash back so they could lend it to someone else, but doesn't seem so! We'll spend it on gin and takeaways then.

Hello Laurie, lovely to read you again. Been thinking about you guys in the USA with all the election excitement and all. Hope you're pleased with the result!

Unfortunately, we don't get tax relief on mortgages in the UK any more, it was abolished a while ago and caused a lot of wailing and gnashing of teeth at the time, especially if you were counting on that little bit of cash back. Ah well, it's only money.....

Hi Ken (I am sure you aren't that grumpy). Banks are just highway robbers without the mask and pointy hats as far as I am concerned. You have to keep a close eye on them or they'll screw you.

Mean Mom, know what you mean, I wish I had gone back to work earlier, worked harder, saved more and generally been a lot more sensible. But then, we wouldn't have had such a good time. C'est la vie.

Watcha Mimi, you forced me off the sofa and in front of the computer once more, even though it was to have another moan about something. At least it wasn't about holidays, which makes a change. Think I share your philosophy about paying debt back, the bank obviously doesn't want it all that much or they wouldn't charge people to do it. Do you think I ought to suggest to Alistair Darling that banks call a moratorium on charging for the early repayment of mortgage debt? They'd get loadsamoney back that way and could lend it to some other poor sods who need a roof over their heads.

Amy said...

If it's going to cost you the same in fees whether you pay it off or not, don't pay it off! Keep your money and forget about curry dust.

And I'm stunned, by the way, that you're so casually discussing paying off your mortgage. Good heavens! Congratulations!

Maggie May said...

So what did you decide upon, SM?
Banks who'd have them! Such a shame we all need them.

CrazyCath said...

I'm not sure how I got here a month late, but I have.
And I agree with you. These "penalty" fees are just too much!!

So what now? May as well let it run its course.
Hope all is well at your end. It took me a month to get here but you haven't posted in a month. You ok?

Mopsa said...

Me, I'd pay it all off and grimace/write truly snotty letter over the bloody £450 they've screwed out of you. And then I'd change banks. Fuck em.

Norman said...

Hey your blogs showed up a month late. Wossappened?
Anyway, I remember the good old days when every Friday we queued up at the foundry office and were paid cash in your hand. Proper money, pound notes and coins. No banks. We paid our bills in cash including our mortgage.
Then i went into nursing and got paid monthly, by cheque. Had to open a bank account....
Its called progress. Or should that be regress?

meredic said...

hmm...so how about stuffing all the money under the matress and paying them in cash every month?

travelling, but not in love said...

Sounds like they really do want their gateau and to eat it. Cheeky feckers.

I hate banks.

Swearing Mother said...

Hi Amy, don't be too impressed re my casual attitude about paying off the mortgage. The bloody thing's been hanging round our necks for a billion years and is now almost gone, but is hanging on long enough to cost us even more interest. Just wanted to do the bastards out of some cash, even a little bit, but they've got us all stitched up.

Hi Maggie May, decided to hold on to our cash and carry on paying. It was too scary draining the piggy bank if it's not going to benefit us financially.

Hi Cath, don't know why but I wrote this post way back after I'd exhausted myself moaning about the holiday, so I just kept it for a while and then posted it, hence the dodgy date. Am OK thanks, just busy and non-creative at the mo.

Hi Mopsa, did think of doing that very thing but chickened out at the last minute and decided to keep the cash instead. Can't bring myself to do it if we don't save anything. Shame really, they could have lent that money to someone else.

Hello Norman, didn't realise that if you write a post and keep it as a draft, when you decide to publish it the date is wrong. Serves me right for keeping it behind my ear for later, so to speak.

Travelling, I hate banks too. They're open when I'm at worked, closed when I'm not, they shut all the counters at lunchtime when there's a massive queue, take ten days to credit money to your account but only two nanoseconds to take it out.

Bastards.

Stinking Billy said...

I've just come from wifeinthenorth where I saw your comment asking her where the hell she was. Talk about the pot calling the kettle black? Get your head down and post something, woman! ;-)

She's like the wind said...

Shocking, they get you all ways. x

Maggie May said...

PS Glad you are OK. Was getting worried!
If you go to drafts and click on post options, you can change the date.
Wahay...... its not often I can give technical advice, but I made that mistake myself several times and found posts disappearing into the archives!

wakeupandsmellthecoffee said...

How did these banks end up with no money considering the charges they force on us?

Swearing Mother said...

Meredic, hi! good idea re the cash, I think it's the only way from now on.

SBH this post looks a lot older than it really it, something weird happened with the date. That's my excuse and I'm sticking to it.

SLTW: I'm thinking of doing a degree course on "How to tackle dodgy bankers" or something like that.

Hi Maggie May, ta for that, I'll give it a go.

Wakeup, I think it's a case of sheer carelessness and greed. It's so easy to be silly with other people's money.

Working mum said...

Ah, Swearing Mother - the banks WANT us to owe them money. They want the interest, if you want to pay up, they get their interest another way in penalty fees. Arrangement fees? Just interest you would have paid had you not had a discounted rate for the first year!

Best to put the cash you would have used to pay it off into some savings that will earn YOU interest.

£50 to send you the deeds?! Sue them for stealing your property! Our bank charges us for storing the deeds to our house,and they belong to the bank until we pay up!

Banks, shmanks!