Case Studies
John Evershed is 42 and an employed builder, he works for a very successful business and takes an active part in the heavy processes involved in building work.
The company John works for is very progressive in looking after its employees and allows staff to carry on working after the company’s normal retirement age of 65 (old legislation)
John is married to Lucy and they have a daughter Emily aged 18.
Emily is gifted student and it is clear to John and Lucy that Emily will eventually gain a place at university to study medicine to enable her to become a doctor, indeed a place is on offer to Emily dependent upon her exam grades of which she is expected to do well.
This though causes a financial problem; John and Lucy have researched university fees and estimate they will need to set aside £50,000 to fund Emily through university. They currently have savings of £20,000 which they have accumulated through the surplus to Lucy’s wage of about £400 per month and John’s wage of £500 per month, they have no plans for the money saved other than helping Emily and do not have any unsecured debt.
Lucy’s entire salary (aside from savings) is spent on luxuries the couple could easily relinquish such as additional holidays (three per year abroad) and John’s collection of model cars that both John and Lucy wish to sell to alleviate the space taken up in the house. The collection has been valued by an independent auction house and could be expected to raise £15,000. The auctioneer has said that the collection is much sort after by other collectors and will sell quickly and John and Lucy felt this could assist in Emily’s university fees.
Lucy though is fairly certain she will be made redundant as her employer has advised all staff in writing that the company will need to make compulsory redundancies from all departments, as Lucy’s job of managing the postal services of the company has largely been automated Lucy fears she will be one of those being made redundant.
John and Lucy have a modest three bedroomed house which John has extended, they remortgaged three years ago on a fixed rate of 4.1% which has one year to go. If John and Lucy remortgaged within the next year they will have to pay an early repayment charge of £2750. Their mortgage has 13 years to go and is a capital repayment mortgage.
John and Lucy’s property is valued at £245,000 and they have an outstanding mortgage balance of £77,000. Both have an impeccable credit history.
John and Lucy have decided to seek the views of the mortgage broker who arranged their previous mortgage (ABC Mortgages) to raise the money needed.
ABC Mortgages completed a full fact find on John and Lucy; the broker advised them that as Lucy has not received an actual redundancy notice it was still quite acceptable to include her income in any assessment of affordability.
The broker researched the market and decided to recommend that John and Lucy remortgaged with XY lender as they had the best rate available 5.2% fixed for five years and recommended they take a interest only mortgage to keep repayments down.
Shortly after Lucy was made redundant and they started to struggle to keep up the repayments as John had also lost work due to the nauture of his employment and was on reduced hours.
The product the mortgage broker had arranged was deemed to be unsuitable and they were able to claim compensation.