Lifetime Mortgage

Onlooker · 23 June 2017 at 3:15PM

We raised 45,000 with one of the leading providers 8 years ago but somehow failed to take notice of the future consequences of our actions on our property and the negative effect on our estate and family.
After 8 years our initial loans increased due to added interesr to 65,580 .we have now been provided with figues
that show after another 7 years our debt against our property will be 100,247 pounds and continue to increase
at 5 to 6 thousnd pounds annually until it ends.
We would advise famillies to obtain future estimates on their future consequences.

clairebeth · 23 June 2017 at 11:21PM

I'm confused by this. It's it interest only? Why aren't you paying it off to reduce the interest? Can you change to a different product/lower rate?

Thrugelmir · 23 June 2017 at 11:27PM

Did you use the £45k wisely?

clairebeth · 23 June 2017 at 11:31PM

I've just googled what a Lifetime Mortgage is! So yours is an interest roll-up mortgage? It does say in the description that the amount owing accumulates very quickly (presumably compound interest?) and that you may end up owing more than your home is worth. Perhaps you need to look into trying to pay it off?

ACG · 24 June 2017 at 2:42AM

I really do not mean this to come across badly, but I can not think of any other way to ask... Did you think someone was going to give you £45k for an unknown number of years and the debt would not increase?

I do not do equity release mortgages, primarily because I always thought they were a bit dodgy (for want of a better phrase), however my understanding is the industry has become a lot more regulated over the last 5 years and is not dodgy now.

Could you remortgage to a new lifetime mrotgage? Maybe at a better rate or with a provider who will allow you to make overpayments/pay the interest or put in a guarantee that will allow you to keep some of the equity to pass on to your family?

csgohan4 · 24 June 2017 at 7:17AM

the Devil is in the detail, if you didn't read the paperwork correctly, you only have yourself to blame.

Onlooker · 26 June 2017 at 12:22PM

Of course we blame ourselves.Insight is a great thing but been faced with over 40 pages of litrature we are having to live with it.We certainly now see the intricaces of the business.To switch will in our case cost 25% of the loan,i.e.11,250pounds and at whatever reduced rate would take 6/7 years to recoup.Not very viable.Compounding Interest is added to your loan of course but the effect and the speed at which it will diminish your estate eccesive to say the least.To be able to afford to pay off the interest annually would be nice but not possible in our case.The only saviour can be house price inflation but no-one will guarantee that..As we have stated people should aquire 10/15/or 25 year forecast against the release that they are considering plus interest rolled up over the years ahead

AnotherJoe · 26 June 2017 at 12:35PM

What alternative would you suggest for people in your position you who presumably are living on the margins if you can't afford to pay the interest? 5% interest on £45k would be what, £200/month?

Thrugelmir · 26 June 2017 at 6:40PM

Onlooker wrote: »

Of course we blame ourselves.Insight is a great thing but been faced with over 40 pages of litrature we are having to live with it.

What are you blaming yourselves for? It's your money after all to spend if you wish. History is littered with examples where a later generation blew the inheritance away. With nothing to show for it.

getmore4less · 27 June 2017 at 8:30AM

compounding is an easy calculation and well know long term you benefit/lose depending on if you are saving or borrowing

often used is the rule of 72,
72/rate = number of years to double your money/debt
eg @5% the debt doubles every (72/5) 14(and a bit) years.

to stop the depletion of your assets you need to either refinance or start paying the interest.

if the kids want to protect their inheritance they can help.

whats the rate as the numbers don't quite stack up.

£45k to £65,580 over 8y 4.71%
£45k to £100,247 over 15y 5.35%
£65,580 to £100,247 over 7y 6.07

if the current debt is £65,580 @ 5% with a ERC of £11,250

to recover the ERC over 5years on an interest only(ish) basis

£65,580 @ 5.00% £274pm £65,530
£76,830 @ 1.44% £274pm £65,527

Problem is you won't get interest only and a rate of 1.44% over 5 years is

7 years the numbers become

£65,580 @ 5.00% £274pm £65,505
£76,830 @ 2.34% £274pm £65,508

A bit more of a realistic rate if your LTV is still good.

if you can pay interest and overpay(anything) without charge that may be better.

TrickyDicky101 · 27 June 2017 at 8:42AM

I hadn't heard of the 'rule of 72' before - that's a nice simple yardstick

There are also more (and probably better or at least more flexible) equity release products around now that can allow payment of monthly interest so the debt doesn't increase. No consolation to you now of course.

Lifetime Mortgage

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