Urgent Advice needed re mortgage. Low income with some savings. Interest only?

ohmeohmy_3

Hi,

I am posting to try and get a little bit of advice for my Mam, who is in a tricky situation, that I need to help her sort out urgently.

Any advice you can offer would be massively appreciateed.

My mam has split up with her partner leaving her high and dry, with nowhere to live.

She is on a low income of c. £750 net PCM.

She has cash in hand of £30k (plus a little extra for sols + costs etc.)

She wouldn't ordinarily be in a position to be looking at a mortgage on that kind of income, but in the area she lives she can buy somewhere small to live for c.£60k.

In 4 years time she will access a private pension releasing c.£15k tax free cash and an annual pension of c.£2100.

In 9 years time she will access a defined benefit, public sector, pension, providing a tax free lump sum of c.£21k with the option of an increased lump sum of c.£39k.

So, initially, she would need to loan c.£30k.

On her level of income what would be her chances of getting an interest only mortgage against the initial £30k, and reducing the capital in 2 stages....ie. with each of her retirement lump sums. Is this a strategy lenders will consider in the current climate?

Her credit history (I imagine) is patchy (though not horrific) and her parents (with a mortgage free bungalow worth c.£130k) would also be able to act as guarantors.

If this is possible it seems like the best plan? Her alternative seems to be sinking her money into rents, which will fritter away her cash, and I think would become unaffordable at the point she retires. The interest only method I outlined would mean she would have no housing costs into retirement.

Can anyone:

* Suggest alternative plans

* See any flaws in my suggestions

* Recommend any lenders that would best suit the needs outlined

* Offer any other comment?

Like I say, the situation is pretty urgent as she has nowhere to go. Many Thanks in advance of your assistance.

Dave_Ham

This is achievable although not easy.

You need to get a broker on board for Mum, interest only would make sense in this instance so long as pension payouts are guaranteed, although the lenders may not agree and also if what money will Mum live on once the mortgage is repaid?

Good for you helping out, just need some more formalised advice to ensure this goes to plan..

All the best...

ohmeohmy_3

Many Thanks Dave. Using my 'plan'...for now, she would have her existing pay less the interest payments, until retirement. The lump sums would be (more or less) extinguished, but she would have £2100 from the private pension plus £6875 from the public sector pension, giving her an income of just under £750 pcm (BEFORE tax) but without the pressures of housing costs. Additionally she would have an amount of state pension to top this up (which I haven't yet looked at - everything happened at the weekend). She would be used to this level of income so her retirement wouldn't actually see her any worse off (and without being morbid she would inherit monies + a share of the house from her parents).

I fear that if she went down a rental route she may be marginally better off until retirement but would find the rental payments unaffordable during her retirement.