Endowments end in 6 months-£6k shortfall, What to do?

bob_dob

Hi,
My friend's parents' (67 and 64 years old) three mortgage endowments are coming to an end this year. Two in August and one in November. As of last week, they are projected to mature to be worth approximately £15k. Their mortgage is £21k. This leaves a balance of roughly £6k.

Due to my friend's father's health, they only pay £50 of the £200 endowment contributions, the state pays the remaining £150. My question is should they contact their lender to ask for the mortgage to be extended and possibly changed to a repayment mortgage or would it be better to get a personal loan topay off the excess so that they will at least have ownership of the house. The only concern is that their credit record is poor.

Equity release is not an option that they are interested in.

Thank you in advance.

Thrugelmir

If the state is paying 75% of the cost of the endowments. How would they propose to fund the shortfall?

bob_dob

I'm sorry, you mean how would the state propose to pay the shortfall?

lonestarfan

bob_dob wrote: »

Hi,
My friend's parents' (67 and 64 years old) three mortgage endowments are coming to an end this year. Two in August and one in November. As of last week, they are projected to mature to be worth approximately £15k. Their mortgage is £21k. This leaves a balance of roughly £6k.

Due to my friend's father's health, they only pay £50 of the £200 endowment contributions, the state pays the remaining £150. My question is should they contact their lender to ask for the mortgage to be extended and possibly changed to a repayment mortgage or would it be better to get a personal loan topay off the excess so that they will at least have ownership of the house. The only concern is that their credit record is poor.

Equity release is not an option that they are interested in.

Thank you in advance.

I don't know of any scheme where the state pays endowments. Do you mean the interest only payment to the lender is £150 pm and is paid by the state under the SMI scheme? (Support for mortgage interest) and the friends father pays the £50 premium to the endowment company?
Whether they can get a term extension will depend on the lender. A lot of lenders maximum age is 75 (based on the oldest person) so they might be ok to do that on a repayment basis for 8 yrs (age 67 o 75) as its quite a low amount of money compared to some I've read about on these boards. They need to speak to the lender. Do you know who the lender is?

Thrugelmir

bob_dob wrote: »

I'm sorry, you mean how would the state propose to pay the shortfall?

Why would the state intervene? A lender will assess their ability to service any new credit arrangements.

bob_dob

Thrugelmir wrote: »

If the state is paying 75% of the cost of the endowments. How would they propose to fund the shortfall?

Im sorry, it was the way you phrased your question, above. I still don't understand it actually but that's probably down to me.

Lonestarfan, thank you for your post. Yes you are quite right, apologies, the parents pay the endowment and the state pays the interest.

The lender is Barclays/Woolwich.

lonestarfan

bob_dob wrote: »

Im sorry, it was the way you phrased your question, above. I still don't understand it actually but that's probably down to me.

Lonestarfan, thank you for your post. Yes you are quite right, apologies, the parents pay the endowment and the state pays the interest.

The lender is Barclays/Woolwich.

Thanks for the clarification. Well the state would continue to pay the interest then and the £50 they used to pay to endowment they can now pay to reduce the mortgage of £6000. But as the interest element reduces because they are starting to repay capital on a monthly basis then the interest from the state will drop but you'll have to check the rules of smi as i think its quite a high fixed rate from memory. With term extensions now the lender will assess their income and affordability to manage a repayment monthly instalment so its not a done deal but they can approach the existing lender to begin with. You say their credit record isn't good so that is a concern but they can try. If that fails and they try the unsecured route and that fails then can the family all club together as a whole and come up with the £6k? When I worked in mortgage arrears we always asked people to ask their family.

lonestarfan

The mortgage calculator on here at 6% says £6000 repayment over an 8 yr term is £79 if that helps.

Thrugelmir

bob_dob wrote: »

Im sorry, it was the way you phrased your question, above. I still don't understand it actually but that's probably down to me.

Apologies if I wasn't clear.

Your friends parents will need to prove that they are able to meet the monthly payments to repay the £6,000 debt.

If they are already receiving assistance to meet their mortgage interest payments. Then difficult to see how they are in a position to repay £6,000.

lonestarfan

Thrugelmir wrote: »

If the state is paying 75% of the cost of the endowments. How would they propose to fund the shortfall?

I think this means if the state are paying 75% of what's required at the moment then your friends parents are only paying 25% of the overall cost then how would they (the friends parents) propose to pay the shortfall if they've only got a little bit of money overall. I could be wrong but I interpret the "they" as being the friends parents not the state.

lonestarfan

Ah Thrugelmir typed faster than me to explain lol ! Thnx Thrugelmir