Endowment shortfall

worried_sick_2013

I am looking for some advice regarding our endowment mtge which is due to end next year. Our repayments are currently being met by DSS as we are on benefits, we cover the monthly small shortfall.
Our mortgage will end leaving us with a shortfall of just under £20,000 which we will be unable to pay.
Can anyone advise what we should do to try to sort this out! Will we be able to switch to a repayment mortgage and still receive help from DSS towards the monthly repayments? Any advice would be grately appreciated

dunstonh

Can anyone advise what we should do to try to sort this out!

Sell the house and downsize. Move to a cheaper area. Depending on your age, you could consider equity release. Maybe take in a lodger.

Many lenders will extend the shortfall by a period of years (typically upto 5 years) and put it on repayment basis. You need to speak to the lender to see if they will do that.

Thrugelmir

You'll need to fund the capital yourselves. With no income you won't be able to obtain a new mortgage.

holly_hobby

The DWP are only paying the interest on your mortgage (upto max amounts).

If you apply for an extension at scheduled redemption to repay the shortfall, the lender may agree to an extension, which will be based on a capital and interest basis and subject to affordability (which isn't solely on earned income, but of which a proportion of certain benefits are an acceptable source).

Even if the DWP agree to continue to meet the interest element, you stil have to find the capital sum due each month.

There may be a solution of lifetime equity release (minimum age, property value, etc, permitting), OR as many are having to do in a similar situation, bite the bullet sell up and purchase a cheaper property outright with the free equity, or go into rented.

Hope this helps

Holly

denis06

I have an endowment shortfall estimated at £30,000 in December 2013. The endowments are with the old Norwich Union and the PMAS. I am 62 next birthday so obtaining a remortgage is nigh on impossible. I have no savings and heavy amount on credit cards. I have already downsized and converted some of the mortgage to repayment. That still leaves me with the above shortfall.
Looks like we are goig to have to sell up and live in a caravan in our old age! Each and every financial advisor can offer me no way forward. So much for being encouraged tio become a property owner when I was younger.

Let_Us_See

Although it doesn't help, if you had opted for a repayment mortgage and not interest only with an endowment as a repayment vehicle, then you mortgage would have been guarnteed to be re-paid at the end of the term.

As a endowment policy holder you should have been receiving annual statements with an indication of the ongoing performance and any expected shortfall. If there is less than one year to run and you are only now trying to address the issue then you have a serious problem, and your most likely alternatives is a further downsize or equity release. If you provide the value of your property and your wife's age (if you have one) I will quickly check if equity release is at least an option.

holly_hobby

The issue with any Lifetime EQ release is the erosion of free equity, given the rollup of interest (to which a equity release council member is recommended for a no-neg equity gte - http://www.equityreleasecouncil.com/home/ ) - which may be significant given your relatively young age for such a product, and may or not be an issue, depending upon any issue or other beneficiaries you may wish to consider. (although there is 1 provider whom permits the payment of intererest, but at your age the rate is high and LTV relatively low).

Please note - that any lifetime equity release mortgage is a niche area of advice, and can only be discussed by a suitably quailified Equity release adviser given the issues and considerations accompanying the arrangement.

Anyother option would be a high st lender whom doesn't have an upper age limit of 75 yrs which most do, of which there is currently 1, but of course your income & commitments (as well as credit status), would have be satisfy their criteria.

Please seek advice from a qualified mortgage broker in each case.

Hope this helps

Holly

denis06

As I said, we have downsized and we have broken up the mortgage (some years ago) so that we have both interest only and repayment and interest. We are over paying each month to try to overcome some of the debt. We are now in a 2 bedroomed bungalow in a low cost area. We cannot afort to downsize any further. We have no disposable income and sit at home each night without a social life. I don't drink or smoke. I don't need reminding that I am in serious trouble. That's why I'm on ths forum in the hope that God is a member and can produce a miracle!!
I am an injured ex-serviceman suffering with PTSD and mental health issues so this is driving me to the edge. Payment on death is an option!!
The value of my property is circa £150,000. Both my wife and I will be 62 years of age in December when the axe falls.
I am grateful for your help but don't hold a deal of hope.

dunstonh

Looks like we are goig to have to sell up and live in a caravan in our old age! Each and every financial advisor can offer me no way forward. So much for being encouraged tio become a property owner when I was younger.

You were warned of shortfalls on an annual basis for the last 13 years. If you had addressed the possibility of a shortfall back then you would probably have seen a monthly cost of £20-£50. With interest rates falling as they did, you wouldnt have noticed the difference. I know its too late to go back in time but others reading that do have time may benefit from the reminder of what happens when you ignore these things until it is too late.

There is no magic cure here. You need money. you dont have money. on the upside, you are only 62 so can reasonably expect to work for another 10-15 years. So, if you take the maturing endowment, clear what you can with the mortgage then ask the lender if they will extend the debt for some more years. The monthly saving by not paying the endowment or the bulk of the interest payment should allow you to pay more into the amount left.

denis06

Stunned!! Thanks a bunch financila world!!

kingstreet

There are interest-only options under the equity release/lifetime mortgage heading, but you'd need to seek advice from a suitably permissioned individual IFA or mortgage broker.

Although this may merely be deferring the inevitable, it could help to bandage the problem in the short-term.