Poor performing endowments mean that we've been left with a £22,000 debt. What can we do?

Posted on 28 February 2016 by Catherine

My husband, who is 69 years old, and I have a mortgage which finishes in 5 months time. This was taken out 25 years ago and was part repayment and part interest only. We have over recent years made a number of lump sum repayments on the interest only portion but due to poorly performing endowments we are going to be left with a debt of £22,000. I heard on Radio 4 one of your John Charcol experts mention that a number of smaller building societies will consider interest only mortgages - can you help?

Thank you for your enquiry via our ‘Ask the Experts’ section of our website. It is unfortunate that your endowments have not performed as well as you expected, resulting in a shortfall of £22,000 towards your mortgage.  This is not uncommon, and many people have found themselves in a similar situation. Firstly, I suggest that you should contact your lender and advise them of your situation. Halifax may be able to extend your mortgage term, offer a product transfer rate or be able to suggest other options which you may not have considered to help you pay off your mortgage before your mortgage term expires.

There are some niche lenders available on the market who can manually underwrite a mortgage based on sustainability and they may be prepared to lend based on your individual requirements. However, the actual term of the loan may be restricted by your ability to continue servicing the loan in retirement. Having the correct figures is imperative as all lenders assess income and expenditure differently. This and details of monthly expenditure would be useful in accessing affordability and whether you have any other assets in the background such as investments and savings tied up in shares would also be good to know.

Depending on your overall financial position, it may be possible to secure a remortgage based on pension income. The majority of lenders allow a maximum age of between 75 and 80 years at the end of the mortgage term and some would consider higher, so it may be possible to secure a remortgage based on your and your husbands circumstances. However, I must inform you most lenders require a minimum loan of between £25,000 and £50,000, therefore you will struggle due to the loan size in this instance. In this incidence, I would suggest that you speak with an expert at John Charcol who will be able to look at your individual case and advise what options are available.

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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