End of 'Fixed-rate' mortgage term, what to do?

[Archie_tect]

Sorry Arch_tect I should explain a bit more. I took the mortgage out in 1994 over 20 years. I pay First Direct £538 per month to cover the interest plus take a little off the loan (I can't remember how that figure was arrived at mind). I have two endowments (one of which has informed me of a potential shortfall) of £158 and £133 a month respectively. A total monthly outgoing towards my mortgage of £829 or so. I have reduced the loan by more than the predicted shortfall but not by much.....£4k or so. But hopefully that will continue to come down.

Bill

Bill,

Have the endowment companies given you a list of the annual bonuses so that you have a guaranteed fund as it stands now [ie not the predicted end payment as this is a guess and not reliable yet]? They won't predict final bonuses yet but at least you can build up the overpayment during the next 3 years. How far short of the guaranteed endowment in place now and the outstanding loan now are the figures because every pound of overpayment reduces the loan and reduces the interest calculated on the loan so it starts to significantly reduce the interest on the balance.

 

[TheBoyBilly]

Archie_tect & reiver, I will get onto the Endowment people and see what they say. As I said, I have reduced the loan by around £4k and, in the coming 30 months or so could possibly bring it down by that much again (possibly more) Given that, I think £8k+ should cover any shortfall (that would be a 10% shortfall ) If it were to be more I could cover it from some money from a claim. Thanks for your comments everybody, they have been most helpful.

Bill

 

[Ivan Ardon]

Also consider cashing the endowments in and converting to a fixed term (or variable, if you fancy a gamble) repayment mortgage for the rest of the term, paying the money you're currently paying toward them into the repayments.

I've turned from having a massive 28% (£20,000 and in all likelihood rising) predicted shortfall in 2016 had I stuck with my endowments, to being all paid off in 2014 by switching to repayment.

Best financial decision I ever made.

 

[TheBoyBilly]

By coincidence I recieved a letter from one of the endowment providers ( the £36k one taken out in 1999) with an 'Amber alert'. Their current view 'is that 6.25% is a reasonable long-term growth assumption. But as your plan has less than 5 years to maturity we have reviewed it using a more conservative growth of 4%'
6.25% would leave a shortfall of £1,700, 4% a shortfall of £4,600.
I am just in from nightshift but I will ring them later and ask some of the questions raised by Archie_tect and others.
Then I will have to contact the other endowment provider.

Thanks again,

Bill

 

[TheBoyBilly]

Oh dear, things have taken a turn. I have contacted First Direct in attempt to get things straight in my head. They say that my mortgage matures in May 2014, but the letter from my 'top-up' endowment shows a muturity date of October 2015. I haven't got the paperwork to hand for the original endowment but I am sure that coincides with a maturity date of October 2014, the 20th Anniversary of my taking out the original 20-year mortgage. First Direct kept asking what I wanted to do..........I haven't a clue. I asked if they had all the paperwork regarding my endowment offers and the chap said No, they take it on the customers trust when taking out the mortgage that they will find funds to pay it off. I am beginning to stress a bit now. What happens after May 2014 and I have to wait 17 months for one of my endowments to mature. I told you all this finance stuff went over my head. What a numpty. I don't think the chap from First Direct could tell from my voice that I was looking to him for suggestions, but I do understand that he is legally unable to offer advice...but would an idea have been too much to ask?

Bill

 

[al78]

Oh dear, things have taken a turn. I have contacted First Direct in attempt to get things straight in my head. They say that my mortgage matures in May 2014, but the letter from my 'top-up' endowment shows a muturity date of October 2015. I haven't got the paperwork to hand for the original endowment but I am sure that coincides with a maturity date of October 2014, the 20th Anniversary of my taking out the original 20-year mortgage. First Direct kept asking what I wanted to do..........I haven't a clue. I asked if they had all the paperwork regarding my endowment offers and the chap said No, they take it on the customers trust when taking out the mortgage that they will find funds to pay it off. I am beginning to stress a bit now. What happens after May 2014 and I have to wait 17 months for one of my endowments to mature. I told you all this finance stuff went over my head. What a numpty. I don't think the chap from First Direct could tell from my voice that I was looking to him for suggestions, but I do understand that he is legally unable to offer advice...but would an idea have been too much to ask?

Bill

Best thing I can suggest is to seek advice from an independent financial advisor.

As I understand it, if you are unable to pay off the mortgage when it matures you will have to sell your house.

 

[Archie_tect]

Bill,


Don't get stressed yet! In the worst case you'd need a short term loan for the gap from May 2014 when you pay off the mortgage borrowed until your endowment mature in October 2015. It looks like you have been mis-sold either the original mortgage orthe endowment because it is normal practice for the two to be linked. However this has been compounded by First Direct not ensuring that the 2 dates corresponded. I doubt that you'll get anywhere by fighting them about it because they will no doubt have got you to sign a disclaimer.

As al says , best get the help of an independent financial advisor. [We use a very good one in Newcastle if you want someone to ring for initial advice.]

Is the May 2014 payment due for both the original £51000 and the top-up £35000? You should be able to simply extend the mortgage loan period until both endowments mature [do they both mature in October 2015?] and pay the additional interest accruing to cover the gap so that shouldn't be a problem. I wouldn't suggest cashing in the endowment early as it probably won't cover the sum owed unless you can increase the overpayment each month now to have paid the shortfall by May 2014 in which case there's no problem anyway. You need specialist advice now but DO NOT be persuaded to change companies and cash in anything because for the first 12 months after the change you will probably just be paying the agent's commission on the new arrangement.

 

[TheBoyBilly]

Cheers Archie-Tect & al78, I have located my original adviser (thanks Google) and his office say he is back from holiday on Monday. I will talk to him and let you know what's what later in the week. Whatever happens, I don't think there is any danger of me losing my home as I have a full five years of work after 2014 to bridge any gap in the mortgage so some agreement can be achieved on that I'm sure. It's still a bit of a mess and I must accept some of the blame. I didn't check the small print and just assumed that at least the dates of maturity would marry up. I can't for the life of me see how people who are dealing with this stuff every day got such a basic thing wrong.

Bill

 

[Archie_tect]

By the sound of it, after the position he's put you in, I wouldn't take anything the original advisor says as gospel and get an independent second opinion regardless so that you have a sound basis to decide what to do.

 

[TheBoyBilly]

Bump! I should have some good news this week as I have a new mortgage arranged (at, I think, 2.69%). Will post the finer details when I get it all straight in my head.

Cheers folks, you have been very helpful and encouraging,

Bill

 

[TheBoyBilly]

Even better news. I nearly took the deal above but after popping into an HSBC branch to deposit some money I got some help from a lovely member of staff. She guided me through stuff the upshot of which is that First Direct have agreed to extend the mortgage term to cover the second 'late maturing' endowment at no more than 1% above base rate throughout the term of the remaining agreement and, importantly, no fees at all. The 'no fees' bit alone will save me £1300. I am more than happy with this deal as I can overpay to get the capital loan down so that any endowment shortfall should be covered.
Thank you all once again for you kindly help and advice.

Bill

 

[ianrauk]

Cracking result Billy...

 

[Archie_tect]

Excellent Bill.

 

[TheBoyBilly]

Just got am email from my Independent Financial Adviser in reply to my notifying him of my intention to not go through with the deal he recommended. He still expects his £295 Broker Fee, and says the Woolwich will demand a £150 admin fee. I thought this was only payable if I had received a mortgage offer which, as yet, I haven't. Can I contest these charges? I have signed nothing as yet.

Bill

 

[fossyant]

He only gets his fee if he gets the deal - he didn't do the job of getting you a deal - tell him to do one.