Mortgage plan is ending but mortgage is not paid off

d1rtyharry

Hello,

This is my first post, bear with me!

I'm desperately worried about my parents' mortgage situation. They owe a huge amount on their mortgage still, despite paying it off for the past 25 years - they were given terrible advice when they took it out, and have only been paying interest off, or something, I don't really understand it tbh. They are self employed and have been hit hard by the recession, so their financial situ isn't great, not to mention they are up to their eyeballs in credit card debt... They're in their 50s/60s and I don't want them to be working when they're 80 just trying to pay their mortgage. My main worry is that they're mortgage plan will come to an end and they won't have finished paying it off - would the house be repossessed or would the bank let them keep making their monthly payments?

Words of reassurance needed... Thanks

bigadaj

You would need to provide more information, such as debts, mortgage remaining current income and house value to get more opinions.

The one thing in their favour should be if they bought the house in the late eighties, and haven't borrowed more, then house prices have probably quadrupled. This should mean that the possibility of selling and downsizing should be open to them depending on the current value.

swampduck

There has been quite a lot about this kind of thing in the papers lately which is highlighting the problem that your parents appear to be facing.
If they are at the end of their mortgage term then I imagine that the building society or bank will be in touch to discuss settlement of any sums outstanding.
Under arrangements set up years ago they most likely would have had an endowment policy running alongside the mortgage. This should (provided they kept up the payments) have left them with a lump sum which would clear the balance remaining.but because profits have been affected many endowment policy holders have been left in the position of still owing monies on their mortgage.
But other people did not have a repayment vehicle in place assuming that their property would increase in value so that they could sell up, pay what they owe and have enough left to downsize to a smaller property. If they are still in their 50/60s they still may have enough working years left to remortgage for the next 10 years or so and sort their problems out in this way.
Or simply sell up and move into rented accommodation using any profit from selling to cushion their twilight years.
None of this will ease your worries but you do need to talk to your parents as this will need sorting - so they can look forward to their retirement years free of financial concerns.

Swampy

dunstonh

It possibly sounds like your parents have buried their heads in the sand a bit as mortgage shortfalls have been projected for over a decade now. Had they addressed it back then, it would have been cheap to solve. The closer you get to the end of the mortgage, the more expensive it gets. That doesnt help them but it may help others reading who have done the same and need that wake up call.

Most lenders will extend the mortgage for upto 5 years or subject to lending criteria for the amount of shortfall. They will convert the shortfall to repayment basis.

They should contact their lender and make them aware of the problem. The lender will then advise on their options.

They are self employed and have been hit hard by the recession, so their financial situ isn't great, not to mention they are up to their eyeballs in credit card debt.

There is another whammy they are likely to face as well. Self employed get lower state pensions than the employed. Because they pay less tax and NI they dont get the full state pensions. So, getting into 50/60s in debt and shortfall on mortgage and less state pension and probably little personal provision means it is likely they will have to keep working unless they are prepared to consider using their equity in their house (providing they havent eaten into that over the years as well). Ultimately, there are options, such as equity release, but that should be considered an option that is a near last resort. However, we are going to need more specific details.