Do you HAVE to use endowments to pay off M'gage?

bob_dob

Hi,

My friend's parents' (64 and 67) three endowments mature this year, the last matures 19th November. Their morgage was £21k (With Barclays/Woolwich) and the latest prediction is that the endowments will be worth approximately £15k so they will owe around £6k.

Paying off the £6k is not an option I'm afraid but they do currently have about £1,500 saved. I would like to know what is the best thing for them.

At present, the state pays the monthly interest under the SMI scheme (£150ish) and they pay the endowments of £50.

Someone helpfully mentioned on here that an option would be to get the/a bank to extend the terms of the mortgage, put the projected endowment payout of £15k in an interest paying account, allow the state to continue to pay the interest on the mortgage and continue to pay the £50 per month to pay off the capital.

Please can I ask how they would go about doing this? I have just read that Barclays have stopped providing interest only mortgages to anyone unless they earn £75k (or £100k between two people) so I would guess that being as my parents have very little income (£226 pension per month between them, this includes pension credit and the state pays their council tax) and are both over 65 then there is zero chance of Barclays agreeing to extend their mortgage, even though the house is worth approximately £140k).

So what should they do? I have advised them to get copies of their credit records to check if there is anything that shouldn't be on there, in preparation for a possible mortggage application later this year.

Any advice would be greatly appreciated, thank you.

bigadaj

Can they sell and downsize, given ages and situation there doesn't seem many other options?

NeverEnough

Downsizing from a small place only worth around £140K is not likely to be sensible, what would they downsize to? As the sum owing after the endowments have paid out is likely to be relatively small, could family not chip in and help make up the £6K (perhaps 4.5K only if they have savings of 1.5K?). Surely a loan for 4.5K would be achieveable even if an agreement had to be set up with the person obtaining the loan?

It just seems a shame that they sell/ lose their home for 4.5K

bob_dob

Hi,

They wont lose their home, there would always be something sorted out in a worse case scenario but my question is would any bank potentially offer them an extension, bearing in mind the equity they have?

Annisele

Their first step should be to talk to Barclays.

From what you say, Barclays wouldn't allow them to take an interest only mortgage as *new* customers. That doesn't necessarily mean it won't agree an extension to existing customers.

mrginge

I particularly like the concept of parents having the 15k sat in a bank account while the taxpayer (ie me) continues to fork out for the interest on the full loan.

bob_dob

mrginge wrote: »

I particularly like the concept of parents having the 15k sat in a bank account while the taxpayer (ie me) continues to fork out for the interest on the full loan.

Well that's fantastic news then!! :0)

holly_hobby

The answer to extending the mge term is not necessarily yes, but most lenders in circs such as this will consider an extension by up to 5 yrs (if deemed affordable).

When does the mge term actually end ?

Are the endowments assigned to the lender ?

Hope this helps

Holly

bob_dob

holly_hobby wrote: »

The answer to extending the mge term is not necessarily yes, but most lenders in circs such as this will consider an extension by up to 5 yrs (if deemed affordable).

When does the mge term actually end ?

Are the endowments assigned to the lender ?

Hope this helps

Holly

Thank you Holly, I really appreciate the help!!

OK, they received a letter dated 21 May 2013 stating that their 'Mortgage is due to mature' in 6 weeks and that they (Woolwich) will 'Arrange a final redemption statement to be forwarded to you which will detail the amount required to repay your loan'.

I shall post a copy of it with personal details removed in a few minutes...

As for who the endowments are assigned to, they do not know but i shall ask them to find out?

bob_dob

I hope this helps?

http://i199.photobucket.com/albums/aa214/craigten/REDEMPTION.jpg

holly_hobby

No, no need to post this up - just wanted an idea how long until the end of the mge term post maturity of the endowments.

I can't belive they have left this matter so late - just 6 weeks until scheduled redemption !!! They must have been receiving red letters for the endowments (highlighting the potential shortfall to target) for over 10 yrs, and to be frank should have taken this hand much earlier than now.

The first thing to do is on contact the lender tomorrow, they need to reveal the repayment issues to them and start the wheels in motion urgently ... that way if they refuse to extend the term your parents will have a little time to explore their options.

Hope this helps

Holly