I don't understand this..

MicheH

Hi, I'm holding my hands up to my ignorance surrounding all things mortgage related so bare with me in asking this silly, uneducated question.

My mother in law has told me that she's on an interest only mortgage. They are both nearly 60 and told me that they don't have to go to a repayment mortgage.

Now have I got this right? They only have to pay the mortgage company the interest every month on the mortgage. They don't have to make any payments to the mortgage company?

I'm thinking if this is true then the mortgage company will never get their money back as when they die their children will get the inheritance. It just doesn't make sense to me.

Can you shed any light on this for me. I want to be able to help her if she's misinformed or at least weary is she's telling me fibs.

Thanks in advance

Trying_to_be_good

If they have an interest only mortgage, part (or all) of the house belongs to the mortgage lender.


That amount will become repayable at either:

1. the end of the mortgage term (normally 25 years after it started), or
2. the death of the mortgage holder, if it's a lifetime mortgage

Eithe way, don't expect anyone to inherit the house itself or its full value as a chunk will be due to be paid back to the mortgage lender (normally forcing a sale of the house) - it doesn't beling to them to leave to anyone as inheritance.

The other possibility is life assurance may cover the outstanding mortgage, if they have a policy.

Rather than cause a family rift, it may be best if your OH asks his parents about it, rather than you asking. Personally, I assume I'll inherit nothing from anyone, then I can't be financially disappointed!

MicheH

He's not expecting anything from it as he thinks the same as what you have said. Thank you for that.

She's under the impression that that house will go to her kids. I think i'll keep right out of it. She can't afford full repayments, I guess if she wants to think that it will go to her children then i'll let her think that, who am I to say otherwise.

Nitha

It depends on how much the property has increased in value. Say she bought in 1980 it will have gone up, the mortgage company will want the value of the outstanding mortgage and the rest goes to her children. If she bought recently then she's pretty much renting from her mortgage company until things change.

Mrs_Bumble

The amount that was borrowed by your mother in law at the beginning of the mortgage term is still outstanding and throughout the mortgage term your in-laws have just been paying the interest. At the end of the mortgage term the lender will expect payment in full of the amount originally borrowed plus any fees etc that have acrued on the balance.

Did your mother in law say anything about an endowment policy running alongside?

When did your in-laws take this mortgage out as I am assuming that it is a straight forward interest only mortgage and has been running for sometime?

This needs to be addressed with your in-laws as if this is a straight interest only mortgage when it comes to the end of its term the lender will want paying and yes they can make them sell the property.

MicheH

Ok, she got the mortgage out in her name only about two years ago. She hasn't mentioned an endowment policy but did comment that the only way the house would be theirs is if one of them died. I'm so sorry i'm not much help and i'm starting to worry now that they havn't understood fully the terms of what they're doing.

How long do mortgage companies allow interest only payments to run?

Mrs_Bumble

She could have taken a lifetime mortgage out then which operates differently but I think the best approach is to ask her who the lender is and if she has the paperwork so that everyone knows where they stand.