How long have you had this mortgage?
Have you paid the endowment proceeds such as they were to the lender? How much shortfall?
We have had this mortgage for approx. 15 years.
We have paid most of the endowment proceeds to the mortgage company however there is still a shortfall of approx. £25,000. The house is worth approx. £440,000 and the repayment part of the mortgage is approx. £80,000.
Thank you. I don't know when you became aware of the possibility of a shortfallbut 15 years ago you agreed to repay theinterest only part of the mortgage in another 15 years. That time is now.
You are therefore in breach of your mortgage terms and conditions by notdoing so. In fact, you are actually quite lucky because they do not have to addthe interest only some to the capital and interest payment, they can simply sueyou for the shortfall and if necessary, make an application to court forpossession of the property.
There are many borrowers in a worse situation than you which have 100%interest only mortgages and although some lenders have agreed to extend theperiod of interest only in order for the borrowers to try to refinance, many ofthem are not able to do so and are threatened with legal proceedings.
To answer your question, they are only allowed to add the interest onlypart onto the capital and interest part of the mortgage conditions allow forit. However if they are not allowed to do that and they have done it, I cantell you that they will be under no obligation to extend the period of interestonly and they would be looking for immediate repayment of that.
On these facts, I am afraid this is one of those that I would not be makingtoo much noise about otherwise, they will simply press you extremely hard forthe shortfall.
The only way out of this is to explore the possibility of refinancing withanother lender which may agree to do part interest part capital repayment but,you are going to have to find a repayment vehicle to repay the interest onlybit.
The final solution which is probably not what you want is to simply sellthe property.
I wish I could give you better news and I appreciate that this is not theanswer you wanted but there is no point in me misleading you.
can I help further?
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I did some time ago when I knew the first endowment would not meet its required maturity get the mortgage company to extend the interest only part of the mortgage to the end of the repayment part of the mortgage at 2018.
How does this have an effect on things and what would you now advise me to do.
In which case, they will argue that you knew this some time ago and youshould have made arrangements between some time ago and now to repay theinterest off. The reason you have a problem now is that you are being asked topay the outstanding interest (on a capital and interest basis) over a five-yearperiod between now and 2018. If you had gone to capital and interest some yearsago when the shortfall had first become apparent, you will be paying less nowof the 25,000 every month.
It doesn't affect my uncertain I am afraid. Sorry
But what if I can prove to the mortgage company that I intend to pay off the shortfall before the end of the mortgage period either by installments, a pension lump sum or by selling the house when it is convenient.
They are likely to take no notice because you have had some years to dothat and haven't made those arrangements. But by all means ask.
With regard to the pension lump sum which may not have been availablebefore now, you would need to produce proof of what the tax-free sum of cashwould be and you would need to undertake to pay that on a particular date.
However you are still in the hands of the lender and they are under nolegal duty to do anything to assist. They are under a moral duty and thegovernment guidelines are that they are to take a softer route but it isunlikely that they would be required to do any more than convert you frominterest only to capital and interest.
I really cannot see a legal way round this for you
How does the fact that the mortgage company has just done this increase in monthly payments without any consultation with ourselves meaning that we cannot meet the monthly payments? Surely this cannot be legal if it means that we will now be repossessed without any chance to provide alternative payment possibilities.
Even if they are not allowed to do it you are contractually bound to pay the full lump sum shortfall. By all means take legal action and if you win, make sure that you have the £25k because you will be shooting yourself in the foot.
Sorry, but that is the situation. I cannot give you the answer that you want.
What if I suggest to my lender that we increase the term of the mortgage by another 5 years to 2023 and lump all of the shortfall into the overall repayment mortgage. This will take the mortgage term over my 65th birthday however my wife is not 65 until 2028 and we both intend to continue working to this time anyway.
That is certainly worth a try. Some lenders will agree to take a mortgageto age 70 (I have one).
I would do it in writing however