Did I give good advice?

skintchick

My mate is worried about her mortgage, and her ability to pay it in the future as she relies on maintenance from her ex. (long story not relevant)

She has 20k in a bond (doesn;t know details :rolleyes: but says doing well and made 5k in four years)

She has ING savings of 7k

Also other savings of 4k

mortgage of 97k, just about to do a five year fix at 5.01 per cent. Some is endowment which will have a slight shortfall, but that ends in 12 years, with 17 years on the repayment mortage

She asked my advice about the future, and I suggested that as she isn't up for overpayments, she should use some of her savings at the time of getting the new mortgage, to rid herself of some of it.

She has decided to use 7k to put towards it.

I am now worried I gave her carp advice (even though this is what I plan to to when my fix ends in July - not with 7k though! I wish!)

Did I? Would she be better doing something else? I appreciate you are not IFAs, but you probably know more than I do!

Edit - she's 41, lone parent, works part time, gets very decent amount of cash from ex hubby, but he has been out of work some time and she's worried about the future. Isn;t hugely qualified (admin assistant) and might struggle to get ft work paying enough to cover mortgage in future.

UK007BullDog

She needs to see an IFA or a fees free broker for initial free advice.

Every person is unique, regarding their income and outgoings and what suits you might be totally the wrong thing for your friend. Her future plans might change, her income might change. Only a certified IFA or mortgage broker can give her the insight of the many options open to her.

You might be her best mate, but there might still be issues that are so deep which you are not aware of, which she might not indulge to anyone.

As a broker we sometimes get to hear things that not even the married partner was aware of. Due to the data protection act and also the mortgage code etc. we are bound to keep things under wraps and confidential.

A_Nice_Englishman

I would agree with UK007Bulldog.

What makes her case particularly complicated is the fact that her ex is involved.

What would his attitude be of she paid off part of the mortgage? Would he reduce maintainance in line with the reduction in the interest payable?

How old are the children? Will maintainance stop when the youngest is 16? or 18? or leaves full time education? Will the mortgage be paid off by then?

skintchick

No, maintenance is separate to mortgage.

Child is 11, maintenance for him continues until he is out of full time education.

This is just a mortgage question guys! I know everything about her, I can tell you that, all I want to know is financically speaking is it a good idea to put the lump sum at the mortgage? Or would it make more sense financially to leave it where it is?

A_Nice_Englishman

Well, she will almost certainly be better off by having £7000 less mortgage than £7000 in savings.

What she needs advice on is the bigger picture like what to do about the endowment which is underperforming, whether to cash in some or all of the bond and reduce her mortgage, what should she do about saving for her pension, how to fund her child if he/she goes into higher education, how she's going to pay the mortgage after the father stops paying maintainance etc etc.

See what I mean?

skintchick

I do, but actually a lot of that is covered - maintenance will pay for higher education as it's full time, she has part of his pension, she has plans for the endowment, but yes of course there are always layers to these things.

She does have a FA although i think he sounds rubbish as he never really advises her properly, but she won;t change from him.

But thanks for clarifying that 7k off mortgage is better than 7k savings. I thought that was right but was concerned I might be wrong!

A_Nice_Englishman

Sounds like she had a good divorce lawyer anyway!

I've assumed she doesn't have any debts other than the mortgage? If she has then it might be better to pay those of first.

skintchick

Nope. No other debts. She's very lucky! He pays her 1k a month separate to the son's maintenance! (IMHO I think she should have saved more than a few grand up by now...)

A_Nice_Englishman

Just one final thought (morbid, I'm afraid)

I hope she has his life insured

skintchick

Oh I think so yes. He has a new family now so he will be insured I imagine, earning the amount that he does (or did before his redundancy).

Thanks for all your help.

Debt_Free_Chick

skintchick wrote:

Oh I think so yes. He has a new family now so he will be insured I imagine, earning the amount that he does (or did before his redundancy).

Just to clarify the point about insurance ... there's no advantage to your friend if he is insured - that money will probably go to his new family.

But ... SHE (your friend) needs to take out insurance on his life, so that SHE gets money if he pops off - to replace the maintenance she will no longer receive. She takes out a "life of another" policy and pays the premiums. She has an insurable interest in him, as he provides her income. She'll need his agreement to do this, but I can't see why he would object.

Regards