Some advice in a moment of crisis would be great

Angelina74

Hi
My parents have had a bad month; my mum has just lost her job, and Dad had a stroke which has left him unable to work. Mum is 63, Dad 64. Their mortgage is due to be paid off in April, but due to underperformance (I think) there will be a shortfall of tens of thousands that Dad was hoping to make up with work and a few ISA' etc he has. This is obviously not going to happen now. They need to find about £40k I think.

Any advice you lovely folks can give? Is equity release always evil? SHould they sell up, or try & hold on to the house and go down the IVA route? Gah - all this is not my strong point!

Any help advice received!

BitterAndTwisted

I think they need specialist advice but I would be very, very wary indeed of any of those equity release schemes. It might be a different story if they were both in their eighties. I dunno what the consequences might be if they go down the IVA route with a mortgage not paid off but I'd be worried about that, too.

Any chance that they could downsize and buy a cheaper property?

silvercar

Approach the lender to extend the term. That will give you breathing space to find a solution. Investigate claiming help with mortgage interest from the benefit people. That should keep the interest payments going.

Meatballs

Check that Dad's employer doesn't have any critical illness cover or old forgotton insurance policies that might cover stroke or inability to work? Some pensions allow you to receive a partial lump sum at the start?

maninthestreet

So what has happened to your father's ISAs??? I assume he doesn't have critical illness insurance?

Angelina74

Hi everyone, thanks for your replies.

Dad is self employed as a taxi driver, so no help from employers sadly.

He says he was never able to get the critical illness cover for less than a kings ransom as he has a pre-existing (but unrelated) medical condition. So none exists. I will check out the pension/lump sum angle.

I have advised them to approach the lender. The did that once Dad had the stroke, but were told there would be no room to move. God bless Braclays - banking with them for 50 years and a static mortgage for 30 means nothing. I will check if there is any state help available.

As for the ISA/endowments etc. - they underperformed hence they are left with the shortfall. (they owe £115k to the mortgage company in April).

Much as they would be devastated to do it, selling up and buying a flat might have to be the answer

tyllwyd

I don't think an IVA would be appropriate because the mortgage debt is secured on the house, so my understanding (and I may be wrong!) would be that an IVA wouldn't cover that debt. I don't know if they could do equity release to cover an existing mortgage debt - all sounds a bit circular to me. I guess they'd have to remortgage but with limited income it would be tough. My feeling is that they should face up to it sooner rather than later and try to downsize - and hopefully make their lives easier in some ways, because at least they wouldn't have this worry hanging over them. Maybe a retirement flat would be suitable?

maninthestreet

Angelina74 wrote: »

Hi everyone, thanks for your replies.

Dad is self employed as a taxi driver, so no help from employers sadly.

He says he was never able to get the critical illness cover for less than a kings ransom as he has a pre-existing (but unrelated) medical condition. So none exists. I will check out the pension/lump sum angle.

I have advised them to approach the lender. The did that once Dad had the stroke, but were told there would be no room to move. God bless Braclays - banking with them for 50 years and a static mortgage for 30 means nothing. I will check if there is any state help available.

As for the ISA/endowments etc. - they underperformed hence they are left with the shortfall. (they owe £115k to the mortgage company in April).

Much as they would be devastated to do it, selling up and buying a flat might have to be the answer

The ISAs would be separate to the endowment. Does the 40K shortfall you mention take into account the monies invested in the ISAs?

Angelina74

I think you may be right tyllwyd. It doesn't help we live in a very expensive town (Winchester). But hopefully they would gain something by going into a retirement flat. Thank you

Angelina74

Hi maninthestreet, yes it takes into account all available monies I believe.

RenovationMan

Have a talk with the mortgage company and with the pensions people. If your mum (and dad when he reaches state pension age next year) qualify for Pensions Credit, they will have their council tax and an amount of mortgage interest paid forever. As long as the mortgage company are kept informed and your parents dont miss any monthly payments, they will most likely extend the repayment period indefinitely.

This is what happened with my parents when they had a shortfall in their mortgage repayment and when they subsequently had to do an equity withdrawal for repairs to the property.

Have them visit CAB for advise about Pensions credit and any disability allowances your parents may be entitled to.