Shortfall - what actually happens?

RichardS

What actually happens at the end of your mortgage term if the endowment does not pay off the amount owing? Say your endowment is short by £20,000 and you haven't done anything about it. What do the lenders do then - do they force you to sell up?

grumbler

Luckily I never had such experience. However, I don't think they force you. If you do not pay they just repossess house and sell it. I think you always can just remortgage or extend the existing mortgage. It is better not to leave this to the last moment.

dunstonh

If your credit is good, then they will allow you to borrow again.

At the end of the day, you shouldnt be in the situation of having a shortfall. Ignoring the rights and wrongs of endowments and how they were sold, you would have been notified regulary about the shortfall and had time to do something about it.

MrsAk_2

dunstonh wrote:

If your credit is good, then they will allow you to borrow again.

At the end of the day, you shouldnt be in the situation of having a shortfall. Ignoring the rights and wrongs of endowments and how they were sold, you would have been notified regulary about the shortfall and had time to do something about it.

But this is only true if you've been given enough notice - there's no way I can make up my expected shortfall - we've only been notified this year, with 7 years left to run :mad:

The only option I have is to take out another mortgage when the time comes

dunstonh

But this is only true if you've been given enough notice - there's no way I can make up my expected shortfall - we've only been notified this year, with 7 years left to run

Typically, endowments would have given a projection every 5 years from year 10 and each of the last 5 years.

You must have missed some post to be first notified of a 20k shortfall at this time.

EdInvestor

MrsAk wrote:

But this is only true if you've been given enough notice - there's no way I can make up my expected shortfall - we've only been notified this year, with 7 years left to run :mad:

The only option I have is to take out another mortgage when the time comes

The usual way to make upo the shortfall is to surrender the endowment,and use the money to immediately reduce the mortgage amount, while also paying in the endowment premium to the mortgage as well as the normal mortgage payment to maturity.

If you will still have to increase your monthly payment after doing that, you should consider looking for a new cheaper mortgage deal at the same time.

Note that you should replace the life cover if necessary before surrendering the mortgage.

Is your endowment with Standard Life? If so you may be due a demutualisation bonus next year.

EdInvestor

Taking out an equity release mortgage is another possible way to pay off a mortgage.