Lifetime mortgage

pampam

Hi everyone
I am looking for some advice for my brother.
He is a 55year old single man with no family apart from me.
He owns a house worth £200,000 and he has a £100,000 mortgage outstanding on it.
We are looking into ways of reducing his £630 a month mortgage so that he doesn't have to work such long hours to pay for it.
He would like an interest only lifetime mortgage or something similar.
In other words he would like to remain in his property until he dies and then the balance remaining on any mortgage could be paid from his estate. he is quite willing to pay the interest monthly until the day he dies.
Hope this makes sense!!
Any advice as to the best way to go would be very much appreciated.
Thanks
pam

Thrugelmir

Switching to interest only may seem a good idea at the current time. However as interest rates rise in the future. You may find there's no saving in outgoing in cash terms.

Consider downsizing to a smaller property perhaps?

pampam

thank you for your reply.
Downsizing is not an option as he loves his house and the area where he lives

Thrugelmir

pampam wrote: »

Downsizing is not an option as he loves his house and the area where he lives

Then its a matter of choice. As paying off the mortgage prior to retirement whilst still working. Will enable him to enjoy the fruits of his labour, hopefully for many years.

Heading into retirement with a large mortgage will reduce his disposable income significantly.

Mojisola

Paying an interest only mortgage while he's working might make life easier but once he's on a pension, isn't it going to be a struggle?

dunstonh

Downsizing is not an option as he loves his house and the area where he lives

What he wants and what he has to do may end up being two different things.

When he gets to 60, he will have the option of equity release (some do make it available at 55 but the best choice comes at 60.

holly_hobby

There are a small no of lenders who will consider your brother's requirement of an interest only mge into retirement (without a max age or term).

Yorkshire BS is one of them, who do not have a maximum age or term, but do restrict lending to 75% LTV on an interest only basis.

Obviously your brother would also need to satisfy the lenders income and status checks. So obviously his income in retirement will need to be sufficient to service the loan.

Problem is how long do you write the term too ? None of us know when we are going to hop off the roundabout (and we are (thankfully) living longer than we ever had before. Lets say he survives the written mge term, what happens then ? Of course you could apply to the YBS for a term extension - but there is no gte that he would achieve this - and then what ? He is back to square one !!

A true lifetime mortgage, if your brother is determined not to downsize, would be the best way to avoid this, although he is a little young to have access to the full range or providers available (as also raised by Duns.)

There are lots to consider on a lifetime mge (and Home Reversion Plans)- including the very important aspect of ensuring that the provider is a member of SHIP & has a no-negative equity clause on redemption. ( should he wish to protect his estate on death).

Have a google to find local brokers who handle and are qualified to administer lifetime mge & equity release business.

Of, if your brother wants to change his arrangements now & pay interest only each mth to the lender, he should seek the svcs of a whole of mke mge broker, who will be able to advise which lenders (in addition to YBS) operate a no max age policy with the best products.

Should you wish to go the above route - please impress upon your brother that future affordability for the mge may be further squeezed due to interest rate movements over the coming yrs.


Hope this helps

Holly

jamesd

He could extend the term of a repayment mortgage well into retirement if he picks a lender that allows that and can demonstrate availability of sufficient income. Another 25 years is doable, or more. He should carefully check his anticipated retirement income because it may well be necessary to pay at a higher than minimum rate before retirement to get the mortgage down to a level that will be affordable after retirement.

dimbo61

Your brother owns a £200,000 house so I assume its got at least 2 bedrooms ! so why does he not rent out a room! he can get £425 a month tax free from renting out a room and use this to overpay the mortgage.
He must be earning enough to have got a £100K plus mortgage in the first place so he needs to look at his spending ( debt free board) if he does not want to retire into poverty.

pampam

Thank you for all your replys. We have taken them all on board and will have a look at all the options.
Thanks again
Pam