Remortgaging for parents...

funkylala

Hi chaps!
My 71 year old dad and 64 year old Mum (in excellent health!) still have £38K to pay on their mortgage that is due for renewal and consequently are 'too old' to remortage. Their house has been up for sale since the credit crunch began and they were downsizing for their retirement. They have ISAs and savings that can take the amount to £22K but I think it's awful that they have to spend everything on their mortgage at their age, which will mean then tightening their belts after working hard all their lives which upsets me. Can me and my husband put that money on our mortgage as my husband is only 32 and we have more than that in equity based on a valuation in 2006? The trouble is we only renewed our mortgage in April.

Dan_Collins_2

Ask you lender about a further advance or raise the money and buy the house as an investment.

funkylala

Oh we couldn't afford the house! It's £320K worth! So when it goes it'll be paid off immediately!:D I was just wondering whether we need to explain to the lender why we're doing it and if they'd let us. It would be the better option than them spending all their savings wouldn't it?

happybroker

Lenders would certainly look at an application from you providing your income etc stacks up.

Is it a better idea or not?...questionable I think.

If you are wanting to help your parents out then that's a different thing. There will be costs involved in raising the cash on your mortgage and will the rate be sufficiently better to warrant these costs being paid?

If the only owe a relatively small amount then a rise in the rate they pay wouldn't have a massive impact.

Have they asked their own lender what they can offer?

Finally, they aren't too old to remortgage. Provided their incomes are sufficient to cover the debt and they are guaranteed (pensions etc) they should be ok but if they are selling the house watch out for tie ins

cecmfs

Another option might be for an Equity release mortgage, of course the amount outstanding on the mortgage does increase, but with a NROCK product, you can pay the equibalent in interest each month into it without penalty, so no increase. Or a Halifax retirement homeplan, which is 40 year interest only mortgage, no maximum age, amount doesn't increase, loan paid of upon sale/ 2nd passing.

Might be worth a try, haven't done a Nrock one for a client for a while personally though.

I am a broker, not had a chance to attach the "broker rider" here!

notisis

As the parents wish to downsize an equity release or similar scheme is not appropriate in this instance! Happybroker has understood the problem exactly and investigating what the current lender may do is worthwhile.

An observation. If the OP did wish to raise further money herself by way of mortgage on her own and husband's property to pay off the parents' mortgage, would that be by way of a loan to her parents which is to be repaid on sale, a gift, or in exchange for an interest in her parents' property or similar? If so, this could have further ramifications depending on how long the parents' existing property takes to sell or if they move at all, eg capital gains, what proportion of the property the OP may "own" etc

funkylala

Thanks for all your replies! It was the last one that made my blood run cold! That would sound just about par for the course! Incidentally, they are extremely stubborn and would be very reluctant to take us up on anything but I just wondered if there was such thing as an easy option! I guess not. I really appreciate your input and thank you for your time.:T

Toughluck

funkylala,

seems to be more of a moralistic approach needed here. I will not give you advice but if that was my parents and I was able to do what you want to do I would do it. the number of people who re-mortgage to raise capital to improve their home and do not do home improvements astounds me. At least you will be relieving your mum and dad of a financial burden.

Whether or not you place a restiction on their house (to maybe get that money back) for when the time comes and you get that money back is up to you but could be an option to you for helping them out.

Leon_W

Why do you not just make the mortgage payments for them temporarily ?

I can't really see any point in you borrowing on your own home to pay off a mortgage on another which is up for sale. Also, if money is tight for them it may be possible to lower the monthly payment by going interest only.

Regards

funkylala

Well they can only get an arrangement over 5 years which will cost £444 per month that we cannot afford.

I might make the phone call anyway toughluck. I did wonder how they'd ever find out unless they tickled me to death as torture that is, when I'd admit to anything...