Interest only ending with shortfall. Advice please??

Egburt_Nobacon

Hi everyone.

My interest only mortgage is coming to an end next month. I will have a capitol shortfall of £24,500 resulting from the demise of the endowment from the original mortgage.

I have had 2 further advances over the years, both on a repayment basis. One will be paid off in a further 12 months and has an outstanding balance of £2.5k. The other has about a 20 year term left with an outstanding balance of £36k.

I have about £5k in cash available with access to another private £5k if required but would prefer a self funding solution if possible.

Total outstanding is £63k, house is realistically valued at no more than £120k even with on a smaller plot.
All with C&G from the beginning, now all on their svr at 2.5%, which I would like to keep if possible, all up to date and good credit history

House is small but has a large garden with rear access suitable as a building plot and precedents have been set with various neighbours taking advantage of their similar gardens. Plot had been valued a couple of years ago by local agent at between £40 to £50k if it had planning permission. Using this was my intended route to repay the shortfall, either by selling the plot, or more preferably self-building on it myself, then selling or renting out the original house

This is still a viable project but has been delayed due to other commitments. I am now in a position to do it but neither would happen quickly enough to repay the mortgage shortfall.

I dont want to fall foul of C&G or upset my credit file and would like to keep my options open. They dont yet know about the building plot option. Dividing the garden will need legal work and would affect the current mortgage situation but in my opinion it would not materially affect the value of the house to a great extent.


It is this route that I intended to use to repay the capitol but obviously this wont happen quickly enough now.

My aim would be to
1) restructure the whole thing and address the shortfall
2) Retain the svr or at least a competitive rate
3) Retain the house and land as two separate entities
4) Retain the option to raise extra funds from the equity as required for a future building project

I am sure that somewhere in the back of my mind I remember a prior conversation with C&G telling me I would have a further 12 months to repay the capitol after the mortgage ends. Is that correct?

I assume my first port of call to sort this will be the existing lender but I would like an overview of my options from any independent brokers please

opinions4u

You need to talk to C&G to find out what leeway, if any, they can give.

Others who know they have an endowment shortfall: Make sure you take appropriate action now. Don't leave it until it's too late.

getmore4less

Short term your best bet is to try and get the term extended for as long as possible while you work out a proper plan. Probably have to go to repayment

if you were needing to draw down equity for other things how were you planning to do a self build?

whats the build costs estimates?

Where has all this equity drawdown gone, do you have anything to show for it?

Thrugelmir

You won't be able to obtain 2.5% on a mortgage to cover the shortfall. So leave your other sub accounts running as they are.

Speak to your lender and reschedule the shortfall over a term which suits you. The shorter the term is the less interest you'll pay. This borrowing will be at whatever's on offer at the time of application.

Egburt_Nobacon

First further advance spent on refurb of house. 2nd spent on private medical treatment and building work for parents and paying off some of wifes old debts from the past. Balance went on finishing restoration of classic car, only for sale as last resort!!

Building work was to be financed from equity release from house, on going salary and savings and self build stage released mortgage combined with sale of car if necessary

Am I right in thinking that currently the loan to value is 63/120 x100% = 52.5% and that if I borrowed a further £25k to pay the shortfall it would be 63 + 25 divided by 120 = 73%??

If so is this acheivable, and how much accessible equity would be left?

Thrugelmir

I would reschedule the debt first. Then deal with selling the garden afterwards. Selling part of your garden will devalue your own house.

Egburt_Nobacon

And thus restrict borrowing power??

Thrugelmir

Egburt_Nobacon wrote: »

And thus restrict borrowing power??

Potentially yes.

Larger garden may well make for an easier house to sell.

Egburt_Nobacon

I dont want to sell the house and garden. I want to sell the house or garden. Possibly!

GMS

You could not sell the garden or build on it without permission from the lender as they have the charge over the full property including garden, unless the garden is on a seperate title?

Speak to the lender asap to sort out what you can regarding the interest only mortgage ending.

Egburt_Nobacon

Cheers I will speak to them tomorrow (well later today) to get a definative about trying to extend the term.