mortgage at 65?

shopping_addict

Hi,

I posted not so long ago about my parents thinking about using an equity release company to get a lump sum (about 20k) to pay off a bit of debt, get some home improvements done and hopefully a holiday out of it too. My dad (age 65) is retired and mum (age 60) was made redundant a while ago and is not working. Their income is basically dads work pension, the state one he starts receiving next month I think....and thats about it....I think it works out around 12k per year.

I was abit dubious about the man who came out to speak to my mum about equity release as he wasnt independant, think he worked for Aviva so was obviously pushing for their product..

Anyways, I got an appointment with an IFA for them last week, he has had a look at their credit reports and has suggested that my dad apply for a 9year interest only mortgage with the Abby as his credit file doesnt look too bad whereas my mums isn't so good. He did say though that to do this, my mums name would need to be removed from the house deeds.....

What implaications would this have for my mum if my dad was to die first, before the 9year term was up? I don't know if im being stupid here (quite probable) but can my mum just get her name back on the deeds after the mortgage has been arranged? Or is it best just to have my dad write a will and leave the house to my mum?

Thanks in advance for your help....

P.S. has anybody experience of getting a mortgage at their age? I hadn't heard of it before.....but then I am pretty clueless with all things financial.

Savvy_Sue

shopping_addict wrote: »

What implaications would this have for my mum if my dad was to die first, before the 9year term was up? I don't know if im being stupid here (quite probable) but can my mum just get her name back on the deeds after the mortgage has been arranged? Or is it best just to have my dad write a will and leave the house to my mum?

the absolutely ESSENTIAL thing to do is to get life insurance on your dad which will pay off the policy completely if he dies before it's paid off.

And you need to realise that 'interest only' means that he's only repaying the interest: he borrows £20,000 and pays interest on that, secured against the house, BUT at the end of the term he has to pay back the £20,000 on which he's only been paying interest - he still owes £20,000.

In 9 years time, is he more or less likely to have £20,000 spare?

And I don't think your dad can just put your mum's name back on the deeds, because the mortgage company's 'interest' in the house will be noted at the land registry, and they'll have to be informed of any change.

So the next ESSENTIAL would be a will.

This is outside my area of expertise, but I'm having to re-learn about mortgages myself.

There is a mortgages board, I'll move you over there a bit later, to see if anyone else has anything helpful to say.

monkeyspanner

It is an upheaval but have they considered downsizing to free up capital? I know its not a particularly god time to sell property but from personal experience of helping parents and in-laws downsize it is easier to do if you are not in a position where you are forced to do it either because of health or finances. The person moving then feels more in control and has time to adjust to their new home before having to cope with illness as well.

margaretclare

Savvy_Sue wrote: »

the absolutely ESSENTIAL thing to do is to get life insurance on your dad which will pay off the policy completely if he dies before it's paid off.

And you need to realise that 'interest only' means that he's only repaying the interest: he borrows £20,000 and pays interest on that, secured against the house, BUT at the end of the term he has to pay back the £20,000 on which he's only been paying interest - he still owes £20,000.

In 9 years time, is he more or less likely to have £20,000 spare?

And I don't think your dad can just put your mum's name back on the deeds, because the mortgage company's 'interest' in the house will be noted at the land registry, and they'll have to be informed of any change.

So the next ESSENTIAL would be a will.

This is outside my area of expertise, but I'm having to re-learn about mortgages myself.

There is a mortgages board, I'll move you over there a bit later, to see if anyone else has anything helpful to say.

I agree with all of this, from bitter experience.

I took out an interest-only mortgage in 1990 when I was 55. It had to be in my name alone because of my first husband's state of health. I learned later, if I had died first he could have been required to leave (although he'd have had certain rights as a spouse). However, he died 18 months later coincidental with my redundancy, so I was left with the mortgage. If only he had thought of doing life assurance years before and kept it up, I could have used that to pay off the mortgage and at least to secure the roof above my head. But he 'didn't believe in it' at the time when it mattered, when he was a young dad, and by the time he did believe in it, it was too late. His health was such that he was uninsurable.

You can guess that I am a firm believer in life assurance and wills!

I eventually used equity release to pay off the original mortgage. However, I would be extremely cautious about using it for any other purpose e.g. to raise money to live on. There must be better options.

shopping_addict

Thanks for your replies, theres alot to think about...

Savvy_Sue, Im doubtful that he will have the 20k to pay back after 9years....when I posted I had just recieved the email from the IFA recommending the 9year mortgage, made a quick call to my dad to tell him the option was there, then came on here for advice without actually thinking it through...

They were originally going to go for equity release, the Halifax Home reversion scheme looked like the best out of a bad bunch but unfortuantely its not an option for them due to my mums poor credit. The next option was through another equity release company but their interest rates were much higher and after mentioning it to the IFA he said not to go near them so we (when i say we, it's not actually anything to do with me but im slightly less useless than my parents when it comes to things like this. Only slightly)

Pretty clueless on what to do next to be honest...their debts amount to about 7k across 3 credit cards, a store card and an overdraft (I think). Im trying to get my mum to go the CAB for help but she already has payment arrangements with the credit cards so not sure the CAB could do much more?

Monkeyspanner-they did considor downsizing but to be honest their house is only worth about 100k -probably get abouy 90k for it since theyre desperate and any smaller properties (2 up 2 downs) in the area are going for 80k upwards (ive been following prices since i bought my house in the same area last year) so it wouldnt really be worth it I dont think.

Margaretclare-I will definately make sure they sort out life insurance and a will whatever they decide to do in the end! I totally agree with your last sentance about not using equity to live on -as it is only a quick fix...but at the moment we can't see any other options....

Euromillions tonight, fingers crossed for that eh!

margaretclare

No, do not go for any equity release scheme with high interest. The one we did is with Legal & General linked to Northern Rock. The interest rate has been pegged to the Bank Rate and as that has been so low for so long, it has not rolled-up since 2003 anything like the rate we were warned. A scheme that starts off with a high interest rate (as a matter of interest, what?) when the Bank Rate is still at its lowest level? No, wouldn't touch it with the proverbial barge-pole. Also, your parents are younger than we were. One of us had to be at least 68 before we could release 25% of the value. Home reversion? I have no experience of this. Look on the SHIP website: SHIP = safe home income plans. https://www.ship-ltd.org/ before doing anything.

Savvy_Sue

Savvy_Sue wrote: »

There is a mortgages board, I'll move you over there a bit later, to see if anyone else has anything helpful to say.

That time has come!

Hi, Martin’s asked me to post this in these circumstances: I’ve asked Board Guides to move threads if they’ll receive a better response elsewhere (please see this rule) so this post/thread has been moved to another board, where it should get more replies. If you have any questions about this policy please email [EMAIL="forumteam@moneysavingexpert.com"]forumteam@moneysavingexpert.com[/EMAIL].

CLAPTON

you haven't posted all the details but

if they can afford to pay interest on a 20 k loan for 9 years (that would be 1000 pa at 5% or 2,000 pa at 10%) and save 20k over 9 years i.e. 2,222 pa) so around 3,222 or more pa) surely they can afford to pay off their debts ?

sorry to say that adding a holiday doesn't seem sensible when you are in debt

holly_hobby

Hi

Equity release/lifetime mortgages require advice from specialist advisers who must be ER1 qualified.

I would presume that the adviser from Aviva (who offer both lifetime mortgages and home reversion schemes), has the suitable qualifications and experience.

Both lifetime mortgages and home reversion schemes require no mge repayments within the term of the loan - the difference between them is usually min age, % of equity released. Home reversion is between 20 - 60% with the level of advance based on age.

Lifetime mortgage - the individuals retain ownership of the the property, whilst the interest is rolled up on the initial debt, repayable by sale of the property upon death or entry into long term care.

Home reversion - the individual receives a sum (subject to conidtions) equal to a % of the property at the time of the arrangement, The individual effectively signs over the property to the provider, who allows them to reside there until death or entry into long term care, at which point the property is sold by the provider to recoup the debt.

Releasing equity can effect the indiviudals qualification for means tested benefits and if the equity is invested may result in increased tax if returns take the individuals income past the age related personal allowance.

Your parents are on the young side for any decent provision for either of the schemes, and the interest roll up on a lifetime mortgage may completely erode any equity on death, depending upon the longevity of the applicants. (it is therefore important in any consideration of lifetime/equity release mges to ensure the provider is a member of SHIP (safe home income plan scheme), and has a no negative equity gte.

My personal advice as a qualified professonal, is to seek as much assistance as possible before considering this route.

Speak to the CC/loan providers - complete an income and expenditure form, and offer an amount which is affordabla and sustainable over the long term. (CAG website has a good debt advice forum too).

Speak to CAB/DWP - see if they are entitled to any financial assistance.

Look closely at all outgoings - what isn't necessary goes, shop round for utility and financial service providers (inc any B&C), visit the debt assistance board on here for assistance.

If any mge is effected on the propety with the removal of Mum from the Deeds - you must ensure that there is life assurance on Dad to protect Mum on his death (obv home reversion scheme would not be suitable as the prop goes to the provider on the mortgagors death).

Hope this helps

Holly