Cleaning up for parents. Loans + SOA Calculator

kylos

This is what's confused us while looking at some of the statements and wording from Chelsea Building Society. There's almost 19k left to go, but paying 225 a month won't get the house paid off by early 2024. Are you saying they don't need to have this 25 year deal paid off by then? Would the mortgage supplier just simply extend it automatically? This is why I'm here, to help clear up all these questions and get us on a proper path. Preferably without paying all the extra interest.

According to the statements it says they are expecting 95 per month, but they are overspending on that. The limit is 375 before they start being charged for going over the limit of overspending.

And what good is the consolidation loan? Isn't it just borrowing money for the sake of paying off borrowed money?

enthusiasticsaver

kylos wrote: »

This is what's confused us while looking at some of the statements and wording from Chelsea Building Society. There's almost 19k left to go, but paying 225 a month won't get the house paid off by early 2024. Are you saying they don't need to have this 25 year deal paid off by then? Would the mortgage supplier just simply extend it automatically? This is why I'm here, to help clear up all these questions and get us on a proper path. Preferably without paying all the extra interest.

According to the statements it says they are expecting 95 per month, but they are overspending on that. The limit is 375 before they start being charged for going over the limit of overspending.

And what good is the consolidation loan? Isn't it just borrowing money for the sake of paying off borrowed money?

You need some answers from Chelsea building society so either make an appointment with them and go along with your parents or ask if they can give permission for the building society to talk to you to clarify the following.

Is part of the mortgage interest only and is the term due to finish in 2024? That would explain why the payment is fairly low and will not repay it in full. Sometimes (and with all due respect your parents do not seem to be on the ball financially) people have let endowment policies lapse or they know there will be a shortfall and have just hoped for the best and the problems only appear when the term is coming to an end as in this case. If the monthly payment is only £95 it does look like part of the mortgage is interest only and either an endowment has lapsed or at some point they have done something to turn it from repayment to part repayment. The building society will tell you that.

If this is so then the only option is to arrange an extended term or increase the mortgage payments so it will be paid off. As the mortgage is relatively low it should be possible to sort this as you have four years minimum anyway. If your parents are still in their fifties and still working the building society may agree to extend the term. There is no guarantee they will do that but you can ask and I cannot see why they would not agree. Or when they access their pensions they could use their lump sums to repay it in full.


I am not sure what you mean by what good is the consolidation loan. I am assuming they took this out to repay other debt as this is usually what consolidation refers to. It is never a good idea as with people who do not budget they usually build up more debt again as your parents seem to have done. Are they making monthly repayments on it?

kylos

Yes I included the consolidation loan in the SOA. It has a 10.07% APR and my Father is paying it off. 181.89 a month, with 8,676.69 to go. It talks about the mortgage and how it is a repayment type loan, and it has a remaining term of 61 months. I'm not entirely sure why he decided to do this, I think he was getting behind a little with bills and stuff and saw the consolidation thing advertised and went for it. It's probably helping to pay towards the original interest-only mortgage.


I feel encouraged by what you're saying. The thing is that I knew they weren't in super danger, but looking at some of the numbers it became clear things needed to be sorted out. What would happen if Chelsea decide not to extend the mortgage??

enthusiasticsaver

kylos wrote: »

This is what's confused us while looking at some of the statements and wording from Chelsea Building Society. There's almost 19k left to go, but paying 225 a month won't get the house paid off by early 2024. Are you saying they don't need to have this 25 year deal paid off by then? Would the mortgage supplier just simply extend it automatically? This is why I'm here, to help clear up all these questions and get us on a proper path. Preferably without paying all the extra interest.

According to the statements it says they are expecting 95 per month, but they are overspending on that. The limit is 375 before they start being charged for going over the limit of overspending.

And what good is the consolidation loan? Isn't it just borrowing money for the sake of paying off borrowed money?

Not to nitpick but you need to get the terminology right so people know what you are talking about. From what you say above the monthly repayment amount set by Chelsea is £95 a month which as you say will not repay a £19k mortgage in four years time. Therefore the mortgage must be either interest only or part repayment/part interest only. They are not "overspending" but "overpaying" presumably to get the mortgage repaid by 2024 and there is a limit because they must be on some sort of deal and there is normally a maximum people can overpay each month without penalty. In your parents case that is £375 so that should be the ultimate goal that they pay that every month. If you put the mortgage rate they are paying and £18500 into a loan repayment calculator paying £375 a month would repay it in about four and a half years anyway. You need clarification from Chelsea BS as to whether this is the case. Prioritise the mortgage and secured loan over the consolidation loan, assuming this is unsecured.

enthusiasticsaver

kylos wrote: »

Yes I included the consolidation loan in the SOA. It has a 10.07% APR and my Father is paying it off. 181.89 a month, with 8,676.69 to go. It talks about the mortgage and how it is a repayment type loan, and it has a remaining term of 61 months. I'm not entirely sure why he decided to do this, I think he was getting behind a little with bills and stuff and saw the consolidation thing advertised and went for it. It's probably helping to pay towards the original interest-only mortgage.


I feel encouraged by what you're saying. The thing is that I knew they weren't in super danger, but looking at some of the numbers it became clear things needed to be sorted out. What would happen if Chelsea decide not to extend the mortgage??

Can he not use his £11k savings to repay that consolidation loan as it is charging 10.07% interest?

Is the mortgage and loan repayments up to date? The only way I can see the Chelsea Building society being reluctant to extend the term is if your parents were too old (it should be fine as they are mid fifties) or their credit rating is very bad. You need to speak to them.

kylos

That makes sense. I do admit that I am not completely up to speed with all the terminology and I may sometimes make mistakes. But what you said makes sense to me. I think we're going to follow through with this plan:


1) Get the credit card paid off immediately.
2) Talk to Chelsea about possibly extending the deal, showing we have the funds to be paying more without overpaying.
3) Get a new home insurance which covers building and contents, without too many optional features, and surely bring down that extortionate rate they were paying.
4) Get the other two adults to give more money to help more with bills

5) Look for other ways to save money. Get rid of Sky protect, save more energy, re-work the grocery budget etc.

enthusiasticsaver

kylos wrote: »

That makes sense. I do admit that I am not completely up to speed with all the terminology and I may sometimes make mistakes. But what you said makes sense to me. I think we're going to follow through with this plan:


1) Get the credit card paid off immediately.
2) Talk to Chelsea about possibly extending the deal, showing we have the funds to be paying more without overpaying.
3) Get a new home insurance which covers building and contents, without too many optional features, and surely bring down that extortionate rate they were paying.
4) Get the other two adults to give more money to help more with bills

5) Look for other ways to save money. Get rid of Sky protect, save more energy, re-work the grocery budget etc.

That all looks very sensible. It should be possible to get that soa looking much healthier with some financial discipline. Getting better insurance deals would certainly be possible. The mortgage rate is not bad so they must have spoken to the Chelsea about it or they would be on the standard variable rate which would be much higher than 2.33%. Financial institutions make their money on people being apathetic about saving on things like insurances, mortgages, energy costs etc. Your dad also must have got bad advice about the consolidation loan.

kylos

Absolutely, and I think the loans on that and the solar paneling are bad, but they could be paid eventually. The only thing worrying me is this 61 month time frame on this consolidation loan. Is that also negotiable?

enthusiasticsaver

kylos wrote: »

Absolutely, and I think the loans on that and the solar paneling are bad, but they could be paid eventually. The only thing worrying me is this 61 month time frame on this consolidation loan. Is that also negotiable?

Possibly but I am not sure what the point of renegotiating this would be. You mean extending the term or reducing it? They are a few years younger than me so state pension age would be around 66/67 so presumably they will be working for another 10 years anyway unless they have private pensions. As your mum is on a low wage I am guessing hers will not be very good. Why cant they use their savings to repay it?

kylos

I mean extending the term so they can pay it off eventually. Maybe put more towards it and get it over with sooner. I don't think they'll want to dip in to their pensions or life assurance policies unless it's totally necessary. The solar paneling thing doesn't appear to have a deadline, so they could pay more towards that after the consolidation loan is gone.