Mortgage question on behalf on my Parents

tasha-debt

Hi,

My Parents outstanding mortgage is around £60,000. Their house is worth around £270,000. About 18 months ago they had to drop their re-payments to interest only as my Dad's driving school business was not bringing in enough money to cover the mortgage and all the bills.

They also have 2 loans and 2 credit cards.

They received a letter from their mortgage provider yesterday asking for proof of the endowment policy whcih they will use to clear the mortgage. My parents do not have an endowment and have never told the mortgage company they do.

If they write to them to say that they do not have and endowment what will happen, will they insist that they must swap back to a re-payment mortgage (which would be £700 a month) which they could not afford to pay?

All advise is very welcome.

Conrad

Ring the company anonamously and frame it as a general enquiry.

Often lenders will allow repayment systems such as OVERPAYMENTS and / or INHERITANCE.

If a lender insists on an ISA I remind them of all the complaints as highlighted in the Daily Mail for many years where packaged products such as endowments (an ISA still invests in the same underlying investments) failed to pay out the sum mrequired at maturity. It seems odd to me that on the one hand thousands of people are winning compensation for underperforming investments (see the many threads on here re this) yet lenders still require someone to have signed up for just such a product.

I have pure interest only and make overpayments to reduce the capital, which is IMO far less risky that relying on city spivs to invest those sums (for which they take a handsome cut of course).

tasha-debt

Their long term plan is in 10 years sell the house, clear the mortgage and buy a smaller place. They are not great with money and are in a lot of debt (its affecting there marriage, they are both very unhappy) Im trying to help them sort it all out one problem at a time.

Do you think it would be a good idea to stay at Interest only and over pay a bit if they can, even £100 a month to reduce the capital???????

Conrad

tasha-debt wrote: »

Do you think it would be a good idea to stay at Interest only and over pay a bit if they can, even £100 a month to reduce the capital???????

In principle it's a good idea to pay down debt, but really a meaningless answer as I do not know your parents.

Imagine if I said in principle it's a good idea to run 2 miles per day. Well what if the person on the end of this advice had a heart condition - the advice could be fatal!

In other words only you and your parents can really decide whats best for them.

Presumably paying down the capital will leave them short to pay thier other debts though?

These other debts if at high interest rates and unaffordable migt be better placed inside the mortgage debt thus reducing thier outgoings overall, but such a solution needs careful thought as you dont want to put thier homeat greater risk of repossession. Some will also argue putting short term debts onto a longer term mortgage makes no money sense, although in reality it does make sense to people who are suffering with poor cashflow.

tasha-debt

Thank you for your advice Conrad. i think i need my parents to complete a full statement of affairs and work through each debt etc.

My Dad earns £27,000 a year, is 52 yrs old and debt and mortgage is around £80,000 total. I dont think that they would get a new mortgage deal.

So I think I need to help them tackle the debt first.