Our interest only mortgage ends feb 2012... help

nad33m

My parents have a joint £225k interest only mortgage that ends next year feb 2012. The house is worth about £500k

The mortgage company where happy to extend the mortgage period for another 10 years except my father is now over 65.

It gets more complicated as my father has the taken £225k and invested it/spent it and says there is no way he can pay anything back lump sum wise. Obviously my mother is not happy and wants to transfer the house into her name and seperate/divorce. Father says he will move out and has agreed to give the remaining equity to mother.

Is it possible the mortgage company will refinance the £225k into my mothers name? Would they consider a buy to let mortgage in my mothers name only?

Father says he is happy to transfer the house deeds into mothers name as he has already taken his share of the equity. How would we go about that?

Are there any TAX impications or stamp duties to be paid?

If nothing is arrange for the repayment if the £225k cash sum in feb 2012 what will the mortgage company do? Would they just put the house on the market and sell it and then give my parents the balance?

Thank you in advance for your advice, as you can see everyone is extreamly worried, I only found out what my father had borrowed a month ago and am now worried about my mother and where she will live etc.

Senior_Paper_Monitor

What income / pension / income into retirement does your mother have ?

What is her age ?

I assume your mother was party to the mortgage - was she party to the investment/spend ?



..... and as I am sure others will mention ... downsizing ?

Thrugelmir

Suggest your mother consults a solicitor. As it appears that whatever the outcome of the relationship between your parents. The property may have to be sold. If there is no way of repaying the capital balance.

There appears to have no thought by either of your parents as to how to were going repay their mortgage. Other than one assumes by downsizing in retirement. So who did what will be of little interest to the lender.

nad33m

Mother is 60 and retired, will get the state pension. Curently she gets around £100 a week total income.

She was not party to the investments, somehow my father arranged it all himself even though the deeds and mortage is joint. We dont really want to get into a criminal investigation at their ages, its fair father has taken his share and will allow mother to take her share of the equity now. If it came down to a fraud of somekind what would the implications be?

At my mothers age she does not want to move again. She could get around £250k equity from the house sale but after fees and stamp duty and moving it would leave around £220k ish which does not get you much in London. A small flat is an option but she would rather take in some tenants to pay a mortage to keep her house.

Senior_Paper_Monitor

I'm afraid I see no options other than downsizing (and moving to a cheaper area ??) or even renting as I doubt the inome you state can support
house ownership.

Any loan/mortgage (other than equity release/lifetime) needs to be justified on income. At her age/LTV etc there is no equity release/lifetime option.

I hope someone else can suggest something and I'd be delighted to be proved wrong in this case.

kingstreet

nad33m wrote: »

Would they consider a buy to let mortgage in my mothers name only?

Possibly. But where would she live?

Thrugelmir

nad33m wrote: »

She was not party to the investments, somehow my father arranged it all himself even though the deeds and mortage is joint. We dont really want to get into a criminal investigation at their ages, its fair father has taken his share and will allow mother to take her share of the equity now. If it came down to a fraud of somekind what would the implications be?

There's been no fraud. There's nothing to investigate. These events do happen.

If your father has agreed to relinquish any interest in the remaining equity. Then your mother is receiving her share of the asset.

bilbo51

nad33m wrote: »

Father says he will move out and has agreed to give the remaining equity to mother.

He's trying to walk off with £225K leaving your mother with a £225K debt! Find a lawyer fast.

Wh05apk

bilbo51 wrote: »

He's trying to walk off with £225K leaving your mother with a £225K debt! Find a lawyer fast.

...................and a £500k house!

Sounds like your father has/will be a having a pretty lousy time, assuming things cannot be reconciled, he is being very honourable, I am sure if it came to it, he could probably claim half of the total estate anyway, regardless of what he has/hasn't done investment wise.

holly_hobby

Some good advice already given.

Just to touch on an additional consideration that may help.

Mum at 60 yrs is old enough for a Lifetime mortgage (equity release), with her meeting the minimum age of several current providers, but she is currently too young for a Home Reversion Scheme (65 is min age).

A lifetime mortgage means that Mum would receive a lump sum, have no monthly repayments, and not only retains full ownership, but a lifetime gte and right to reside in the property, until either entry into long term care or death. Instead of a monthly repayment, the chargeable interest on the sum borrowed, is rolled up onto the outstanding mortgage, and is re-payable upon sale, entry into long term care or death. Its important to also note, that there will of course also be various fees associated with the processing of the mge (both solicitor and lender) .

Of course it should be considered that depending upon the duration of the mortgage, the final sum payable to the provider, may have greatly or even completely eroded any free equity in the property - which is why its vital that it is carefully considered, with the whole family included in the decision, and imperative to secure a provider with a no negative equity gte. As Mum/her estate has retained full ownership of the property, the mge may be redeemed by either sale of the property, or from other available capital from her estate.

Mums property value easily satisfies the min property valuation of current providers, and there is sufficient free equity - BUT - she is relatively young for a lifetime mge, and whether 225k could be acheived to repay the existing lender as a result of this is the crux.

As already stated by SPM and others, the options other than a lifetime mge arrangement, would be to downsize as her income of £100 pw is obviously not sufficient to service a 225k mge commitment, and either pch something within her capability and over max term re age restrictions (gen age 75), or go into rented.

Equity release (if she elects to pursue this avenue) for the aged is a specialist area of advice, and your Mum must seek advice from a duly qualified Equity Release adviser.

Based on the current net property value and marital situation, it indicates there may well be other complexities relating to IHT, wills,trust and estate planning, loss of means tested benefits inc long term care provision and other tax considerations that need to be reviewed as part of the exercise. So you may wish to seek an adviser that is both Equity Release, Long Term Care and Diploma Qualified, to have all the relevant issues dealt with in-house so to speak. Alternatively of course you may have the various issues outside of the immediate ER mortgage, reviewed by seperate duly qualified practitioners in the relevant areas.

I feel for your Mum and her situation which must be hellish at a time of life when you are expecting to take life easier ... and I do wish you and your Mum well .. good luck

Hope this helps

Holly x

nad33m

Thank you all for your contributions. The Lifetime mortgage (equity release) option seems like a good option.

What my mother has said to me is she would like to stay in the house. She has stated that she would rent out 3 rooms to tenants to pay a new mortgage. Rent is around £90 / £100 a week per room in the area. Would the current lender/mortgage bank refinance on a buy to let type mortgage where she would actual live as a landlady in the property?