Interest only mortgages for over older people

jayrose52

Hi,

I'm wondering if anyone has experience of interest only mortgages for over 60's. I am 58 and my husband is 61. Our current mortgage is up in 4 years and we will not have the funds to repay it. We will eventually downsize but don't really want to do that just yet if we can help it. My husband is self employed and is happy to continue working beyond 65. I have a small personal pension and my husband has two plus we will both have state pensions.

Staffysel

It really depends on the mortgage company what their criteria is, some only go up to 65 but some go over 65 with sufficient pension income, so I would suggest speaking to your mortgage provider, explain the situation and they will be able to tell you what your options are.

property.advert

I have often thought about this issue. In a practical sense, they must surely just roll it over. As they never ask for life cover to be assigned or even shown anymore they cannot waffle on about that being a problem. They also cannot assume you will retire at 65, that is a multi generation ago idea and has little bearing today.

In fact, I would cheekily ask them for a reduction in the interest rate because you have paid them for so long and you are a known good risk (presuming you are).

dunstonh

As they never ask for life cover to be assigned or even shown anymore they cannot waffle on about that being a problem.

Yes they can. The responsibility to have a suitable repayment vehicle or funds to repay the mortgage lay with the borrower.

They also cannot assume you will retire at 65, that is a multi generation ago idea and has little bearing today.

That is correct. However, the lender has to use the income forecast and that forecast has to be justified. So, there will come an age that they will draw the line in the sand.

In fact, I would cheekily ask them for a reduction in the interest rate because you have paid them for so long and you are a known good risk (presuming you are).

The OP is not a known good risk. Indeed, quite the opposite. As it stands the OP cannot repay the debt.

Plus, as the Ops husband is self employed, he gets a lower state pension than an employed person. The personal pension is small so they are going to be low earners as well.

So, whilst the lender will listen and will probably come to some arrangement that doesn't involve repossession, they will not view them as a good risk.

A longer term view (say mid 60s) is to look at equity release to repay the mortgage debt. It passes on the problem but given the poor financial state, it may be the option most suitable (although it is generally considered the option of last resort)

Harry_Powell

If you have low income, the social services will pay the interest on your mortgage when you exceed state retirement age.

jayrose52

Thank you for your replies.

Our home is worth at least 3 times our outstanding mortgage so I don't really think we pose any risk to our mortgage provider, one way or the other they will get their money and our record with them is excellent. The reason we find ourself in this position is bad choices, when we took out the mortgage my husband took out a private pension plan that should have paid the loan off at the end of the term, needless to say that ain't gonna happen. Having said that I realise that it is our responsibilty to have made arrangements to repay the loan. I don't thik we ever intended to still be living where we are but hindsight is a great thing. We are where we are and are just looking for the best soution to our situation.

The reason I asked this question is because I had been researching equity release and this was one of the suggestions, apparently there are mortgage lenders who provide this kind of mortgage for older people whereby you pay the interest and at the end of the term you pay the original loan back from the sale of the property unlike some of the equity release plans where you pay nothing and the interest compounds. Plus this way we would still have control of when we sell our home.

jamesd

You seem to be starting to grasp for straws to try to avoid downsizing now. The equity release mortgages are more expensive than standard mortgages and may well make you worse off for the short term plan you have. Better to downsize and use equity release on the smaller place.

Alternatively, how great is the amount owed and how does this compare to the amount of money you could save or pay off each year if you were really determined to cut expenses as much as you could?

How will this change when the state pensions start? Will all of that extra money be available for extra mortgage repayments?

What I'm wondering is just how long it would take to clear the mortgage, so you could consider discussing extending your options with the lender four years in advance, showing them that you're doing decent planning and that it'll be in their interest to extend for long enough for a realistic repayment plan to work. They will probably require a switch to a repayment mortgage as part of the deal.

Starting the discussion four years before the deadline is way better than waiting. Good that you're asking here four years before the end as well!

getmore4less

I agree why not start looking at downsizing/final move now over the next few years.

Better to do it sooner rather than later especialy if it involves a new area, don't forget health, last move should be a bungalow/appartment(with lifts).

Harry_Powell

Remember though, with downsizing it's not like simply swapping a larger house for a smaller one, there can be significant costs involved. You have estate agent costs for the sale - 1.5% average, anything upto £1500 for solicitors costs, removal van, etc, etc.

Sometimes you can be no better off financially by downsizing unless there is a large differentiation between the sale price of your old house and the purchase price of the new, so make sure you do your sums!