Interest Only, Guarantor Mortgage for Over 65's - Is it possible?

VikkiB

Hi All,

My grandparents currently have a mortgage with the Halifax, it is an interest only, lifetime mortgage which my Uncle is guarantor on. It is for approx. 46k and they get support on the monthly interest payments from the pension credit agency.

They want to move and two months ago when we chatted to the Halifax everything seemed fine; we need to extend the mortgage to approx. 65k to 70k and my uncle is still guarantor.

Having had an offer accepted on the property they want to buy and accepted an offer on their property the Halifax have just told us that they have changed their policy and would not be able to increase the amount for the mortgage. They are not even sure that they can carry on with the mortgage we currently have but they feel they could make a case for it as we already have the mortgage in place.

We can't put my Uncle's name directly on the mortgage as this would potentially nullify the support from the pension credit agency and we cannot afford to make the monthly interest payments. We don't want any actual financial stake in the property we just want my grandparents to be able to live in the property (which as a retirement property) and it be sold to repay the mortgage after their deaths.

Obviously this is very distressing for everyone and I just wondered if anyone could offer us any advice on any other lenders that might consider this type of arrangement or if anyone had any other advice?

Cheers,

Vikki

sdooley

Could a member of your family agree to lend your grandparents the £20,000 shortfall on an unsecured basis? Otherwise I think your grandparents need to find somewhere cheaper to buy.

VikkiB

Unfortunately my folks, my Aunt and Uncle have already put in some cash when they bought the original property and don't have any more funds available at the moment. My grandparents had always rented so didn't have the equity to begin with.

None of us grandkids are in a position to lend any money either, my partner and I are the oldest and we're still recovering from buying our first property about 8 months ago.

sdooley

You need to think about the running cost of the mortgage on the new place too. Presumably the pension credit won't increase to cover the extra £20,000 borrowed so your grandparents will have to cover an extra £130 (or £160 if they were asked to take it on a repayment basis) a month from their means-tested incomes. Might not sound like much but the new place could over the years become a millstone around their necks. The Halifax sound like they are practising responsible lending to be honest - your grandparents cannot afford more debt.

Conrad

Of course you only have your grandparents best interests at heart, and aren't thinking about inheritence here.

Im wondering why they want a bigger a mortgage. Why not sell up and move down market.

Something doesn't add up here.

VikkiB

Don't get me wrong, I am all for the banks lending responsibly and the last thing we want is to give my grandparents any stress with additional debt they cannot afford.

We are just trying to look at all the options available to us, the pension credit agency have been fantastic and I'm not sure what their position is on the extra interest payments (my Uncle is talking to them about it).

We will keep trying to find a solution, so if anyone has any other suggestions we would be grateful, and if there isn't one we will have to re-think the purchase completely.

It's just a little frustrating but I do understand you have to be prepared for this sort of thing, just not sure my grandparents were as they aren't really up on the whole process.

Conrad

VikkiB wrote: »

None of us grandkids are in a position to lend any money either, my partner and I are the oldest and we're still recovering from buying our first property about 8 months ago.

For this to be the case all of you only drive old bangors, dont go abroad, spend much on clothers TVs etc.

They could downsize and then take an equity release mortgage where they can borrow a percentage of the value and not make repayments. Upon death the home is sold to clear the debt, and whats left is yours.;)

VikkiB

The property they are looking at is actually smaller than the one they are currently in but they need to move into a retirement place with a part time warden that is closer to the rest of our family as they are not as mobile as they used to be and, I believe, as result of it being in a different area and it having different services (i.e. the warden) the value is higher.

VikkiB

Conrad wrote: »

For this to be the case all of you only drive old bangors, dont go abroad, spend much on clothers TVs etc.

Spot on! My partner and I don't own a car, make do and mend and haven't had a holiday away from home (abroad or in the UK) for about 8 years! :rotfl:

Fergie73

I really don't understand why they're buying not renting. Given that it's interest only, the principle will never go down, so effectively all they're doing is renting it from the bank but with the added stress and risk of property ownership, debt, interest rates changes etc, which they don't need at that age.

The Housing benefit people will pay all the rent on a place too. The only potential benefit of buying interest only is if the value increases so that there's a big profit when the place is sold, however at the moment prices are falling and look set to do so for quite a while. Besides which, it's not in their interests if this is intended to be their final house, as they won't see any profit.

This just sounds like years of unnecessary stress and risk, with the potential for having a massive problem later on if the sale of the property doesn't pay back the loan.