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  • FIRST POST
    • jimmy55
    • By jimmy55 31st Jan 18, 5:03 PM
    • 8Posts
    • 1Thanks
    jimmy55
    shortfall at end of interest only mortgage
    • #1
    • 31st Jan 18, 5:03 PM
    shortfall at end of interest only mortgage 31st Jan 18 at 5:03 PM
    Hi, I am 62yo and my interest only mortgage of 43K came to an end in July last year. Due to financial problems 10 years ago I no longer had the endowment policies in place which I had intended to pay off the mortgage. I had assumed that there would be no problem carrying on interest only until I retired at 66 and was able to downsize. How wrong I was! Although my credit rating is now excellent, my age and lack of interest only mortgages means I am struggling to find a mortgage / loan to repay the lender. I am self employed with a fairly low income as my wife and I have 4 independently living parents between 80 and 95 plus 2 kids at home. The house is conservatively worth 350K so there is plenty of equity.
    I have made some payments reducing the sum to about 38K and have about 11K which I can use to part pay off the outstanding sum plus the possibility of a pension pot of about 20K but I am loath to cash in my pension pot if I can avoid.
    A lifetime mortgage would have been ideal but a further complication is that my wife is only 49 and renders us ineligible. One more complication is that there are 2 charges against the property from historic credit card debts of 17K
    I would welcome any suggestions, I just need something to bridge the 6 years to retirement when I could downsize, release equity, or have potentially benefitted from inheritance.! Cheers, Jim
Page 1
    • silvercar
    • By silvercar 31st Jan 18, 5:15 PM
    • 37,303 Posts
    • 157,155 Thanks
    silvercar
    • #2
    • 31st Jan 18, 5:15 PM
    • #2
    • 31st Jan 18, 5:15 PM
    Have you discussed this with your lender?
    • jimmy55
    • By jimmy55 31st Jan 18, 5:46 PM
    • 8 Posts
    • 1 Thanks
    jimmy55
    • #3
    • 31st Jan 18, 5:46 PM
    • #3
    • 31st Jan 18, 5:46 PM
    Yes, they are pretty unhelpful moving forward ( despite being a mortgage customer for 35 years ). I dont come anywhere near their 'stress tests' for a new mortgage and they dont offer any more interest only products and although they are delaying any actions, the pressure is growing. I have drawn a blank with L & C and Stepchange.
    • Thrugelmir
    • By Thrugelmir 31st Jan 18, 5:49 PM
    • 58,925 Posts
    • 52,250 Thanks
    Thrugelmir
    • #4
    • 31st Jan 18, 5:49 PM
    • #4
    • 31st Jan 18, 5:49 PM
    Yes, they are pretty unhelpful moving forward ( despite being a mortgage customer for 35 years ).
    Originally posted by jimmy55
    While lenders have a duty of care. They cannot find a solution where none exists. Downsizing seems the most appropriate course of action. Clearing your debts in the process.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • Muscle750
    • By Muscle750 31st Jan 18, 6:27 PM
    • 989 Posts
    • 302 Thanks
    Muscle750
    • #5
    • 31st Jan 18, 6:27 PM
    • #5
    • 31st Jan 18, 6:27 PM
    Why cant you downsize now? Your not the only one whose gonna get caught by this ticking time bomb
    • jimmy55
    • By jimmy55 31st Jan 18, 6:47 PM
    • 8 Posts
    • 1 Thanks
    jimmy55
    • #6
    • 31st Jan 18, 6:47 PM
    • #6
    • 31st Jan 18, 6:47 PM
    I could downsize now, but with the age of my family its not the right time. As I said in the OP I am really looking for other possible interest only options for 5 years. I fully appreciate they are not obliged to help me as lending criteria is a whole different world to 25 years ago.
    • Amst
    • By Amst 31st Jan 18, 7:18 PM
    • 96 Posts
    • 71 Thanks
    Amst
    • #7
    • 31st Jan 18, 7:18 PM
    • #7
    • 31st Jan 18, 7:18 PM
    Ask your kids to contribute to the outstanding balance in return for equity in the future downsize.
    • Lysimache
    • By Lysimache 31st Jan 18, 7:24 PM
    • 162 Posts
    • 52 Thanks
    Lysimache
    • #8
    • 31st Jan 18, 7:24 PM
    • #8
    • 31st Jan 18, 7:24 PM
    By age of family, what do you mean? Are your children not of working age?
    • jimmy55
    • By jimmy55 31st Jan 18, 7:30 PM
    • 8 Posts
    • 1 Thanks
    jimmy55
    • #9
    • 31st Jan 18, 7:30 PM
    • #9
    • 31st Jan 18, 7:30 PM
    One is 15 and the other 18yo apprentice so probably not much potential there!
    • Lysimache
    • By Lysimache 31st Jan 18, 7:32 PM
    • 162 Posts
    • 52 Thanks
    Lysimache
    Ah, I see what you mean by a few years it's easier to downsize.
    • silvercar
    • By silvercar 31st Jan 18, 8:07 PM
    • 37,303 Posts
    • 157,155 Thanks
    silvercar
    Yes, they are pretty unhelpful moving forward ( despite being a mortgage customer for 35 years ). I dont come anywhere near their 'stress tests' for a new mortgage and they dont offer any more interest only products and although they are delaying any actions, the pressure is growing. I have drawn a blank with L & C and Stepchange.
    Originally posted by jimmy55
    I would keep making your case that you only need a few more years on interest only and then you will definitely be selling up.

    Lenders really don't like repossessing, if you dig your heels in, they also have limited options. You don't want a new product, you want to continue paying interest only. You want a change in end date not a change in product. I realise they don't really do this, but their options are as limited as yours.
    • jimmy55
    • By jimmy55 31st Jan 18, 8:08 PM
    • 8 Posts
    • 1 Thanks
    jimmy55
    If only I'd had the foresight to go for 30 years instead of 25! You never know what the future holds. Listened to the radio yesterday about the Interest only timebomb. I think there will be quite a few owing a lot more than me sadly.
    • jimmy55
    • By jimmy55 31st Jan 18, 8:10 PM
    • 8 Posts
    • 1 Thanks
    jimmy55
    Thanks Silvercar .... yes, I've tried to keep them posted with any progress and keep up substantial payments
    • enthusiasticsaver
    • By enthusiasticsaver 1st Feb 18, 12:07 AM
    • 6,609 Posts
    • 13,859 Thanks
    enthusiasticsaver
    no lenders like interest only these days and the cheapest way would be to stay with your current lender. If you pay in the 11k what is the longest term they will give you and are the monthly repayments affordable?

    The only other option is to crystallise your pension or sell up and downsize.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • silvercar
    • By silvercar 1st Feb 18, 9:11 AM
    • 37,303 Posts
    • 157,155 Thanks
    silvercar
    So basically you want the lender to extend a 30k mortgage on a property worth 350k for a few years.
    Something that would have been possible without question had you requested a longer mortgage term initially.

    Although there is no legal obligation on the lender to help you, I would argue that not to do so would be unreasonable on the following grounds:
    a)the pain to you of refusal is far greater than the cost to them of extending the facility
    b) the repossession costs (which is their only other option should you not move your mortgage yourself) far outweigh the costs of allowing this
    c) treating customers fairly - the mantra of lenders these days should mean that they consider on a case by case basis.

    You could consider a complaint to the financial ombudsman, but you need to exhaust discussions with your lender first. In fact asking your lender for a letter of deadlock (this confirms you can't reach agreement), may encourage the lender to be more sympathetic.

    Here is a recent page from the FoS on interest only mortgages with some case studies:

    http://www.financial-ombudsman.org.uk/publications/technical_notes/interest-only-mortgage-case-studies.html#c

    You can see that in some cases the FoS decided that the lender advised the borrower and as such could be held responsible for leaving the lender in a difficult interest only situation.

    I would say it is particularly hard that just by ticking the box for a shorter term than you actually needed all this pain has been caused. Now if the lender was technically advising you on the mortgage, they could have suggested you play safe and go for a longer term.
    • Voyager2002
    • By Voyager2002 1st Feb 18, 9:27 AM
    • 12,143 Posts
    • 8,262 Thanks
    Voyager2002
    I am really looking for other possible interest only options for 5 years. I fully appreciate they are not obliged to help me as lending criteria is a whole different world to 25 years ago.
    Originally posted by jimmy55
    Could you not move to a repayment mortgage for the final four years?

    Since interest-only mortgages are no longer offered, your willingness to pay off a bit of the debt each month could be the only way to get your lender -- or any lender -- to help you.

    Presumably the four aged parents are receiving pensions, so make sure that they understand the situation and the need to contribute in order to save the house.
    • pennystretcher
    • By pennystretcher 5th Feb 18, 4:37 PM
    • 386 Posts
    • 1,448 Thanks
    pennystretcher
    Is your wife working? Could she take on a mortgage solely in her name?
    Mortgage free
    • amnblog
    • By amnblog 5th Feb 18, 5:07 PM
    • 10,551 Posts
    • 4,172 Thanks
    amnblog
    Sounds like with your parents in residence and an early 'inheritance' may be in order.

    Have you looked at a personal loan or loans given the balance is now about 25,000.
    I am a Mortgage Broker

    You should note that this site doesn't check my status as a Mortgage Broker, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • jimmy55
    • By jimmy55 5th Feb 18, 5:51 PM
    • 8 Posts
    • 1 Thanks
    jimmy55
    Sounds like with your parents in residence and an early 'inheritance' may be in order.

    Have you looked at a personal loan or loans given the balance is now about 25,000.
    Originally posted by amnblog
    Hi, thanks but parents live independently ( one pair quite a way from us ) hence commitment of our time when something unexpected happens. The problem with any repayment loan is lack of income to pass current 'stress' tests .... hence desire for interest only for 5 years.
    • dimbo61
    • By dimbo61 5th Feb 18, 6:00 PM
    • 9,911 Posts
    • 5,334 Thanks
    dimbo61
    I would for the time being overpay what you can afford each month
    The balance is getting smaller and the lender can see you are slowly paying down the debt
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