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

holly_hobby

They will obviously have to keep on paying the mge interest until then, as the total debt will still be outstanding.

At which point when the endowments mature, they pay the maturity proceeds off the mge, and if agreed, at which point the lender will extend the term (subject to status), for the residual amount by upto 5 yrs. This however will no longer be on interest only but on a capital and interest (ie repayment) basis, in order that the os mge debt is actually fully redeemed at the end of the term.

Which is why the suggestion of having obtained a short term mge extension, simply continuing on SMI whilst retaining the endowment proceeds on deposit (until the lender stops the music), is simply inaccurate advice (and not just morally).

I am assuming they are contacting their lender today to start the ball rolling on this ? If not, they really should be.

Hope this helps

Holly

bob_dob

I really do appreciate your help you know!!!
Yes, I have written a letter for them detailing that there will be approximately a £6k shortfall and that they request a mortgage extension to give them extra time to pay back. I didn't specify a time period but from what you say perhaps they will be offered 5 years.

My concerns now are that because they do not have income apart from their £225ish pension and their credit records will be poor due to no credir other than a phone bill, that they will be refused an extension.

Can I further trouble you to ask what the repayments would be over 5 years being as they probably use the £1k that they have to reduce the excess to £5k
If they will have help with the interest, will it just be as simple as £5k divide by 60 months, so £83 per month?

holly_hobby

It will depend upon what the mge interest charge is, and various other factors (inc any max age restrictions), so I don't think it would appropriate for me to guesstimate what the figs may be, when they turn out to be something else.

If they don't have the income to support the extention (or their source of income is not accepted/permitted by the lender), which WILL be verified as any mge extension is essentially new borrowings - then their extension application may be rejected, so they need to bear this in mind, as extending is one thing, but the lender must prove affordability was assessed and verified as suitable, which is 2 different things I'm afraid.

Why not have parents give the lender a call today, to see what their general approach is to such situs ?

Back it up with a letter of course with financial details, but if this were me I would have to know now/today/asap what my possible options were, instead of delaying things any further ... I don't think I could sleep until I knew .... and whilst we here can say what normal procedures are, we are not the lender, and ultimately, what we think is irrelevant to how the lender will actually manage this.

Hope this helps

Holly

bob_dob

Hi and good morning! Thank you again for all the help, I have relayed the information and they are in a better position now, thanks to all of the advice on this wonderful forum.

The only one thing I could not help them with was why, if the mortgage term ends in a few weeks, would the bank then be willing to wait until November for the final endowment to mature? Will they definitely do this?

ValHaller

bob_dob wrote: »

The only one thing I could not help them with was why, if the mortgage term ends in a few weeks, would the bank then be willing to wait until November for the final endowment to mature? Will they definitely do this?

If the mortgage and the endowment were sold as a package with the lender being party to the endowment deal, they are bound by honour if nothing else, to wait to accept repayment from the endowment.

If they just had an interest free mortgage and sourced the endowment separately, then the lender will not be bound to wait for the endowments to mature.

holly_hobby

It STILL doesn't sound as if your parents have phoned the lender on this .... so Bob the following is going to sound very harsh, but its meant with good wishes ....

SORT THE JOB OUT .... and please with only weeks to go, do something more immediately proactive than posting here .... when all we can give you is comment not fact .... parents are wasting valuable time when ultimately ONLY the lender can give the actual info reqd.

Please come back when you have spoken to the lender and been advised on what process this will take.

Sorry if this is harsh, but as things have been left so VERY late, you must understand the urgency of the situation.

Holly xx

ValHaller

holly_hobby wrote: »

It STILL doesn't sound as if your parents have phoned the lender on this ....

Sorry if this is harsh, but as things have been left so VERY late, you must understand the urgency of the situation.

Good point. This issue will have made its way over the horizon 10 years ago and was in the middle distance 5 years ago. Now it is at the door, ready to huff and puff and blow the house down.

Today. Tomorrow is years too late.

holly_hobby

I know Van, I made this point to Bob when he confirmed it was just a matter of weeks until scheduled redemption.

I think his parents have hoped it would go away, but I'm finding it incredibly exasparating that having given comment over the weekend, Bob is still coming here with qs and answers on how we think the lender will deal with various issues, when its only a matter of weeks until D Day - esp as we seem to have an affordability issue too. (I know that reads really harsh, but my sole concern is that if the lender won't play nicely, the OP & parents will have at least have a little time to digest the situ and start considering and exploring what their options are - hope OP doesn't fall out with me !)

I am hoping the lovely Bob's next post will be that they/parents have spoken to the lender, and what the lenders prelimary thoughts and comments are (subject to any status verification etc or course).

Fingers, toes and eyes crossed that they can come to an arrangement with the lender to remain in the house, paydown with maturing LCEs and extend term for residual on affordable C&I ..... one can hope !

Time will tell ....

Holly xx

bob_dob

Good morning all.

Let me start off by saying thank you again. Secondly, they are my friend's parents, not mine, so whilst I am doing my best to push, I can't push too hard, if you see what I mean.
Thirdly, the letter requesting an extension was sent on Monday so they will have it by now for sure. The request has been made. I included permission to email my email address if they needed to make contact quickly.

Finally, please forgive my naivity but if the bank will not be requesting the full balance until the last endowment matures in November, why is there such a difference between requesting an extension NOW and, say, tomorrow? (even though the request has now been given)

ValHaller

bob_dob wrote: »

Finally, please forgive my naivity but if the bank will not be requesting the full balance until the last endowment matures in November, why is there such a difference between requesting an extension NOW and, say, tomorrow? (even though the request has now been given)

These things tend to proceed by trigger points. There may be a huge difference between initiating an extension and then reaching a trigger point on the one hand and on the other reaching the trigger point after which it may be too late to initiate an extension.