Remortgage for Parents, what's the best route?

Alan_M_2

My Parents both in their very early 70's are asset rich but cash poor.

They own a house which is worth in the region of £150K - £160 (having checked on ourproperty.co.uk for recent sales). They have a mortgage in the region of £20K, so plenty of equity.

My mother has a pension, my father has a private pension and small income from working part time as a goldsmith (He never retired just reduced his hours).

I want to make life more pleasant for them, it seems silly to have all the money tied up in the property and theyr'e scraping to get by. I have no intention of using an equity release plan type of affair where they sign over the property etc, and I'm happy to guarantee payments myself for the mortgage.

I'm not the slightest bit bothered about inheritance, I want to see my folks comfortable and stress free in their later years, we're not looking to liberate a fortune, maybe £30K , bringing the mortgage to a total of £50K, only a thrid of the value of the property.

My circumstance may effect how we go about this. I'm currently expanding my business, which although it's a Ltd company, we're borrowing a lot of money to get into new premises and buy more stock and I've had to provide personal guarantees as a result, so on paper right now I probably look overexposed as far as credit risks go, although I have no adverse credit history, - pay every thing on time etc, always have. Not a bankrupt, no IVA's no CCj's.

What's the best way to go about liberating £30K to give my folks a more comfortable retirement?

Any particular lenders I should approach?

Thanks in advance for your advice.

Alan_M_2

Further develpments today,

Current outstanding mortgage, £26,500 which they are currently paying £600 month.

They are happy to gift me a percentage of the property if it helps etc.

I'm happy to actually make the payments and take out the mortgage.

toonfish

as an aside, why not consider equity release? You would only need to raise the existing £26,500, rather than another £30K on top and give them in effect £600 per month

Alan_M_2

toonfish wrote:

as an aside, why not consider equity release? You would only need to raise the existing £26,500, rather than another £30K on top and give them in effect £600 per month

We're trying to generate a lump sum for them so they can buy a new little runaround, go on a few holidays and enjoy retirement. I'm not bothered how we arrive at that point just as long as we do.

toonfish

OK, what sort of level of income do they have, that's the next thing

Alan_M_2

Parents net income around £16K - £17K.

What would be ideal is to generate a £60K mortgage on this property over 25 years.

If that means they gift some of the property to me so I can borrow against it and clear their outstanding debts, that's fine by me.

toonfish

OK, they could do equity release, as one option - there's no reliance on their income and they could either roll up the interest or pay it if they choose with some lenders. The advantage would be a lifetime fixed rate until second death/entry into long term care.

If they can afford the repayments though then the likes of Halifax have no maximum age on borrowing so they could take on a conventional mortgage.

Only they/you can decide which is best suited to their circumstances, and if the monthly repayments are not an issue then a conventional mortgage gives more control.

There would appear to be little advantage in them gifting the property to you at this stage.

If income is tight, then equity release may be better. This is a specialist area, and you need to ensure anyone advising you is suitably qualified.

Alan_M_2

Equity Release isn't an option, my Mother simply won't have that at all.

I'm happy to be guarantor on any mortgage they take out, so the Halifax sounds ideal, the current lender will only lend for 5 years which is why the repayments are so hi for such a small mortgage.

I'll call the Halifax and see what they suggest.

Alan_M_2

The Halifax were most helpful, said they'd have no problem with me being on the mortgage as long as I was on the Deeds of the property.

Appreciate your advice getting me this far.

EdInvestor

Alan_M wrote:

I'm happy to actually make the payments and take out the mortgage.

But can you afford it?What if your business has problems and you can't?

Your parents could end up with an even more unaffordable loan on their property.

I'd suggest equity release is a better idea for them, they should get a reasonable deal at their age just to cover 26k.

Interest rates on equity release are are under 6% now.

Alan_M_2

The payments aren't an issue, this entire mortgage we're contemplating is a little over 1x my basic salary, before directors dividends, so it's a small percentage of my income.

Explain Equity Release please, I may have misinterpreted what it is.