Mortgage problems and wills

GSD4ME

I hope someone out there can help ...

My wife and I have lived in the same house for 18 years and our current outstanding mortgage balance is £135,000. Our mortgage type is a part-repayment one and currently costs us in the region of £1,100 per month.

Last year I was unfortunate enough to lose my job and was unable to find a new placement. To provide some income, I have been working in my local supermarket as well as other ad-hoc, part time jobs. These jobs bring in approximately £1,000 per month. My wife works part time and has income of approximately £300 per month from other sources.

As you will be aware, the monetary situation is now becoming a bit of a struggle. We are NOT behind in the mortgage payments but that situation may well change in the next few months as our savings and credit cards are used more and more.

Having explored various sites on the internet regarding mortgage arrears, all the advice and information point to the fact that people struggling with their mortgage repayments should get in touch with their lenders as soon as possible and that mortgage companies only pursue home repossession as a last resort. As we have not yet fallen behind with our mortgage payments, I have not yet approached our lenders in case they downgrade our credit ratings, which would not be beneficial to my mind.

Given that mortgages are usually long-term loans from a lender, it is obvious that recouping of the loan is a major part of the thinking of lenders and time scales are usually done on long-term calculations.

With these facts in mind, I have being investigating how best to try and cope with my reduced income and still continue to live in the same house, as we have no desire to move from our current home.

Our house is worth approximately £650,000, my approximation based on the recent sale value of similar properties in our village.

With those facts in mind, one of the areas that I thought would be worth pursuing to try and remedy our financial situation was to alter our wills to specifically leave a percentage of the home to the mortgage company, in return for a vastly-reduced monthly mortgage payment during the remainder of our lifetimes. Thus, for example, on our deaths, our wills would leave 50% of the house to the mortgage company - in this case worth £325,000 at current values. Obviously, the value of homes will alter over the years but even with a catastrophic 50% drop in house prices, the value of the lender's share would still be greater than the outstanding value of our current mortgage. In addition to this proposal, I would be willing to pay a nominal figure per month to offset any mortgage interest payments that would be 'missing'.

Neither my wife nor I, aged 53 and 47 respectively, have any direct family dependents and our wills are concerned almost exclusively with the welfare of our animals and the farm livestock.

The financial situation is becoming more difficult and I wish to enquire of you whether you know of any mortgage company scheme that would consider foregoing, or at least offsetting, our mortgage against the future value of our house on our deaths? I have investigated the 'equity release' plans of several companies but they all seem to be based on a nil-outstanding mortgage or be age-related, neither of which would be applicable in our case. Remortgaging the property would seem to be very difficult as it is impossible to confirm our incomes (besides, the combined total would in theory be unable to sustain our mortgage) and our ages would seem to count against us.

I look forward from anyone who has any ideas

simonjfisher

As far as I am aware there are no mortgage companies that would consider this type of arrangement. There was a scheme a few years back called the Shared Appreciation Mortgage but that has had many problems so I don't think lenders would want to get involved in something similar now.

The main thing in your favour is the equity and your anti-ostrich outlook. Why not consider making the mortgage completely interest only to reduce your monthly payments? This would kind of have the effect you are looking to achieve anyway, as when you die the mortgage will be paid off from your estate.

This may not reduce the payments enough though. You say you have no direct family dependents but do you have any family you could turn to for help? I don't mean charity but how about selling them a share of your property in return for a monthly income to help you pay the mortgage? There would be issues to consider with regards to your existing mortgage company but it may be possible.

Despite your reluctance to contact your mortgage lender I would urge you to do so urgently before it is too late. I don't think it will have any effect on your credit rating to just talk to them.

Hoep this helps! :-)

lisyloo

It sounds like you have a sizeable property (unless you live somewhere really expensive).

Could you consider renting out a room or two?

Could your wife consider full time employement?

Perhaps you could explain why she works only part time - it might help us in offering some suggestions?
For example if she is housebound the she could take in ironing.