Mortgage Current Accounts?

SpookyPirateGhost

My mum is due to finish paying off her mortgage in December 2022 but has just told me that she's got a Mortgage Current Account with £7,500 that the bank have told her she has to pay off before that time, and she has already started receiving letters asking how she intends to pay off the balance.

The mortgage itself is currently at 1.5% interest and the Mortgage Current Account at 4.5%, so she is trying to overpay on that where possible, but is only getting part time work at the moment, and as she is nearing retirement age that is unlikely to improve much.

For context, she has always been terrible at managing her money, she makes bad decisions and will bury her head in the sand until she's in dire straits. It's usually because someone or something has bailed her out that she has coped in the past.

As things stand now, that somebody is probably going to have to be me, so I'm trying to get a grasp on the situation so I know what my options might be down the line. I don't have a mortgage (yet) so I don't really understand what a Mortgage Current Account is - can somebody please explain it to me like I'm five?

Thanks in advance!

Thrugelmir

Can you find out who the lender is and what the product is?  Sounds like some kind of a borrowing reserve that's linked to the mortgage. 

ACG

Some lenders (I think the biggest was Barclays/Woolwich) offered a sort of reserve account that you could dip in to periodically if you wanted to take money out for things like home improvements etc. It was kind of like an overdraft.

Difficult to say much more than that really. 

As it stands she needs to be paying around £250 a month to ensure it is cleared before the end of the mortgage, I appreciate from what you have said that is unlikely. I think really your mum just needs to be overpaying where she can. The lower the balance is in 2022, the more likely they are to just allow it to carry on as it would not be economical to chase it through the courts if the balance is coming down gradually anyway. 

Retired_Mortgage_Adviser

From what I remember, it's like a current account with an overdraft that this secured against the equity in the property. The interest rate is much lower than a normal overdraft with the disadvantange that it's secured against the home and must be cleared off by the end of the mortgage term.

[Deleted User]

Retired_Mortgage_Adviser said:

From what I remember, it's like a current account with an overdraft that this secured against the equity in the property. The interest rate is much lower than a normal overdraft with the disadvantange that it's secured against the home and must be cleared off by the end of the mortgage term.

I remember it that way as well. 

It was a normal bank account with your direct debits and salary but had a secured overdraft so if you went to an ATM it would show your balance as like -£100,000. 

getmore4less

If it is barclays they have been sending letters for years about the mortgage reserve accounts to many borrowers.

SpookyPirateGhost

Thanks everyone!
ACG - I think it actually is with the Woolwich. You're probably right about what you say - if she's clearly paying it down it isn't in their interests to start court proceedings so I guess it is just a case of chipping away at it 😩

Thrugelmir

The lender is merely covering their backside by sending the reminder letters. At the end of the mortgage term they'll expect the debt to be settled. If it's not they effect recovery. 
If full settlement appears unlikely open a dialogue now and come to an arrangement.