Mortgage Shortfall Getting Bigger What To Do

stressedoutmum

We have just had our endownment mortgage statement through. It should be for £35,00 and is due to mature Dec 20131. The projections are as follows:

4% per year £10,700 shortfall
6% per year £9,700 shortfall
8% per year £8,700 shortfall

We did go down the mis-selling route but we didn't get that. We increased our endownment payments each month into it before we realised it was silly increasing the endownment as the growth rate was poor. We went to our buidling society and the best option was to make the mortgage part endownment and part repayme so we have been paying an additional £50 per month for the past 2 years to help. Now we don't know what to do as the loss seems to be getting greater each year and we would like our mortgage to finish in 2013. Not sure if the best option is to try and save what we can and pay that towards the mortgage as a lump sum in 2013 but we will never get anywhere near £10,700 saved or to increase the repayment part monthly but we can only afford about £50. Would this make much of a difference to the outcome. thanks

Annisele

How much of your mortgage is currently interest only, and how much repayment? Does the term of the repayment part of the mortgage also run until 2013?

If you've already switched £20k of your mortgage to repayment you likely don't have a problem at all. If you only switched £1k, you likely will have a problem.

stressedoutmum

can't find anything that tells me in particular how much is repayment and how much endownment. I found a letter from the building society from 2005 when we changed to part payment (I thought it was only a couple of years ago - more like 6!) that says you will still owe £28,000 at the end of the mortgage term and you need to make arrangements to pay this but our most recent mortgage statement says we still owe £32,000 . The original mortgage was for £37,000

Meeper

If you will still owe £28,000 at the end, then that is the amount on interest-only.

Change as much of this to repayment as you can afford every month is likely to be your optimal solution.

Annisele

As Meeper says, sounds like you have £28k on interest only.

If that's right, and if your endowment policy has a target of £35k, then a £10,700 shortfall on the endowment would leave you with £24,300 in your hands. The actual shortfall on your mortgage would then be about £3,700, which is a substantial sum but much less than £10,700.