Endowment underperformed - what next

pixiepie99

Just hoping for a bit of advice...

My parents in law have an underperforming endowment policy which matures in November and will leave a £14,000 shortfall on their mortgage. They've known this would be the case for years but haven't done anything about it and still need to talk to the bank about what happens next. They have finally agreed to do that so we know what we're dealing with. I'd like to go with them to the bank so I can hear what they say as I'm not convinced they will understand the advice they receive (or communicate it all to us) but we don't live close and they resist our attempts to get meaningfully involved in helping out in any case.

They have £3,000 that they can use to pay down the outstanding balance to £11,000.

They are both in their 70s and have a very low income - basically state pension and some pension credits. They are currently paying around £240 a month to the endowment policy.

Can anyone advise what their bank (Halifax) is likely to offer them, if anything given their ages? For example, are they likely to offer them some sort of repayment mortgage or just demand they pay the balance off in November?

Does anyone know if there's any way I can speak directly to Halifax about it (maybe in a hypothetical sense)? Obviously we're ready to step in to help financially as soon as we know what is required.

Thanks in advance for any advice you can offer.

AnotherJoe

You can pay the difference if you fancy making up for their utter financial ineptitude / head in sand attitude over the last 15 years.

Or they could downsize, sounds as if they have little money anyway, how would they cope with any sort of significant repairs to their house such as new boiler, serious roof repairs etc? So get them to sell up, release some equity move to a more maintainable lower cost property.

Thrugelmir

While lenders have a duty of care. They correspondingly have to apply affordability rules etc to protect themselves. Possibly a stay of execution for a few months is what will be offered. Really its up to your inlaws to have proposals and solutions. Don't just turn up expecting the bank to have the answers. As not in their remit to advise. Contractually the balance is due. So the bank is in within rights to repossess.

tacpot12

Thrugmeir is correct - don't expect Halifax to have any solutions to offer them. The options are:
- Allow the bank to reposes the property
- Sell the property quickly - which means they are at risk of not getting its full value.
- Your parents or you pay the remaining capital.

If they can pay £240/month on the endowment now, why don't you get a loan for £11,000 and lend this to your parents informally, so that they can continue to live in their house. £11k will be paid off in 4 years and even if your parents die before them, presumably you will inherit the house?

If you have siblings, try to get them to borrow equal amounts, but if they can't/won't, make sure the siblings are happy that you loan the parent the money under a formal loan agreement.

Your parents do need to face upto this. I'm sure they will be grateful for your compassionate support.

pixiepie99

Thanks for the advice everyone. Luckily we're in a position to pay the balance for them if it comes to it. I'll let my husband know that his parents' assumption they will be put on a repayment mortgage are unrealistic and that we need to get all the facts together ASAP. With hindsight, we should have pushed them more to go and speak to the bank when they originally mentioned this a few years ago but it's really difficult to meddle when it's not your own parents.

Supplementary question: rather than making a huge dent in our savings which are meant to be going on refurbishing our house, would we be able to pay the balance off using a long 0% interest credit card in order to pay it off over a few years? I know you normally can't make mortgage payments with a credit card but if it came from a 3rd party to pay off what's owed, is it treated differently?

pixiepie99

Good news - my father in law as spoken to Halifax and there is no danger of repossession and they will be offered some sort of mortgage in November to pay off the remaining debt. Apparently we now have to wait to see what deals are on the table then. However, my brother in law is going to go with them when they next go to see the bank so that we are fully aware of the options. The remaining debt is small compared to the value of the house so hopefully we will be offered a fairly low interest rate and can pay it off for them over a relatively short term.

Phew! My in laws haven't handled it particularly well but I can only imagine how stressful it would be to have this hanging over you when your income is so limited.

AnotherJoe

Do please post back what the offer is when that happens would be useful for others to know.

pixiepie99

I will do. It shows there's hope for people out there in similar situations.