help needed - endowments

lsfw

Hi

My parents have had a mortgage with bradford and bingley for 25 years.

It was an intrest only mortgage and they had an insurance policy running alongside it, which they were led to beleave would mature and pay the mortgage after 25 years.

I know it might sound daft but they didnt really know what they were getting into and now the insurance company say they have no endoment policy and the insurance policy wont mature its just been a case of paying insurance all these years.

They are due to pay £10,000 in novemeber, i know that might not seem much to some people but their circumstances mean that it will be difficult for them to get this, they could get a loan but its surley wrong that after all these years and all they have paid they still owe ten grand.

Please can someone give me some advice on this.

My parents are both ill at the moment and this stress is making things very hard.

McKneff

Are you sure that there is no endowment policy, are you sure that they just dont have a short fall of £10K. (the mortgage would probably not have been only £10K if you see what I mean)

They will have had letters for quite a number of years informing them of this shortfall, sounds as if they have been putting their head in the sand to be honest.

They could take out a nortgage for the £10K or a loan or could you help them out, or could they downsize

dunstonh

but its surley wrong that after all these years and all they have paid they still owe ten grand.

They havent paid and that is the problem. If they had paid an endowment policy then it would be something like 8-10 times the monthly cost of the life assurance. So, in the scheme of things they are not worse off. Indeed,the way endowments have been falling short, they are probably better off as £10k today in real terms is very small compared to £10k 25 years ago.

What evidence do your parents have that an endowment was discussed and provided (in their eyes) 25 years ago? Who did they use to put it in place (who then failed to do it)? i.e. solicitor, accountant, IFA

Why didnt your parents ever think about the lack of a statement telling them their values or if it was in shortfall or not?

Most lenders will allow interest only mortgages to roll over for another 5 years. So, if they approach the lender and ask for an extension to build up more funds, the lender will normally do this if they have been paying with no issues. The lender may insist (and it would be common sense to) switch to repayment basis for those 5 years. It would put the monthly cost up but then with low interest rates, it may not be too bad.

lsfw

the mortgage was only £10,000, i know its cheap but my dad worked for a company who owned houses and they sold them to emplyees really cheap.

They have been getting letters showing their statements etc for years yes, and showing they were paying the insurance, they were told the insurance would mature and pay the mortgage and they were never sent anything about a shortfall because the insurance was the wrong type if you get what i mean.

they have always been told this and now they are being told the policy was just a payment type and there would be no payout at the end

lsfw

dunstonh wrote: »

What evidence do your parents have that an endowment was discussed and provided (in their eyes) 25 years ago? Who did

Most lenders will allow interest only mortgages to roll over for another 5 years. So, if they approach the lender and ask for an extension to build up more funds, the lender will normally do this if they have been paying with no issues. The lender may insist (and it would be common sense to) switch to repayment basis for those 5 years. It would put the monthly cost up but then with low interest rates, it may not be too bad.

thanks for your comment. I am quite frustrated about the whole thing as i know they have been really stupid, they just dont know much about financial issues and were told everything would be ok and believed it.

they went through a mortgage broker 25 years ago and i kind of understand that back then not many people bought there houses and they proabbly didnt know. but its the fact they have been told it would be ok and no one has mentioned this shortfall thats getting me.

could bradford and bingley arrange a mortgage extension that would pay off the £10,000 within 5 years?

Froggitt

Yup - it would probably cost them something in the region of £200 a month, although if they are not working (you mentionned they are ill), they may find it hard to get a mortgage extension.

Maybe put the mortgage in your name if you are working?

25 years ago and i kind of understand that back then not many people bought there houses

You make it sound like the 19th century!!! No, it was slap bang in the middle of the 80s housing boom/Thatchers Right to Buy etc. People chatting at the water cooler would be discussing how they made more on their house last week than they did at work.

dunstonh

they went through a mortgage broker 25 years ago and i kind of understand that back then not many people bought there houses and they proabbly didnt know.

Late 80s isnt the dark ages. Housebuying was all the rage.

but its the fact they have been told it would be ok and no one has mentioned this shortfall thats getting me.

No-one would know that there is a shortfall other than your parents. You are told about things you do have. You are not told about things you dont have. They would have seen a solicitor at the start and a mortgage adviser would have tried to set up a repayment policy if they could (greater commission for starters and this was pre-regulation and commission was everything then).

I will be blunt (no change there then). I have come across cases like this a number of times where one partner did know but was too embarrassed to let the other know. They went interest only with life assurance with the intention to do a repayment vehicle later but never got round to it (either forgot or couldnt afford it). Then when it was too late to do anything about it, they try and blame others to hide their actions. Im not saying that is the case here but it is a very common scenario.

could bradford and bingley arrange a mortgage extension that would pay off the £10,000 within 5 years?

most lenders do. I would imagine they will want it switched to repayment basis though.