Interest Only Mortgage - No Separate Investment. Help!

MissCellaneous

Hello, I was hoping someone could help me to help my nan?

Since I posted this:

http://forums.moneysavingexpert.com/showthread.html?t=380491

I've spoken to nan in more detail, and have found out that C&G need her to double her monthly payments for the remaining 11 years of her mortgage, to pay off the capital, because she has no investment or anything to go with what was her interest only period.

I still don't understand quite how she and granddad had gotten themselves into this situation, but the reality is that she simply can't afford to double her payments - she can barely make ends meet as it is. I think she has about 30K left to pay.

She's been told she'll have to sell her house, and she's willing to do that (though she can't even imagine affording a valuation etc), and has also been looking at Sell and Rent Back options (don't know much about them, are they a good idea?). What choices does she have here?

Thanks a lot for any help you can give. I'm really worried about her.

absolutebounder

I cant see any judge turfing them out of the house as long as they pay the interest. I believe some lenders have no upper age limit so remortgage to one of them

lil_3

I know some lenders e.g. Halifax used to, and may still, offer a 'Retirement Home Plan' scheme. Whereby the mortgage is on an interest only footing over a long term e.g. 40 years on the basis that the mortgage debt will be repaid from the proceeds of the estate (i.e. the sale of the property) on the death of the mortgagor [no upset intended]. This does mean that whoever inherits the property will also inherit the mortgage debt.

The problem may be your nan's age and her affordability - if she cannot pass the affordability test on pension/benefits then this might be a non starter (the lender is unlikley to want to consider her employed income as this would be deemed to be unsustainable long term due to her age - this is not discrimination as such as it is the lenders responsibility under FSA rules to offer 'fair lending')

toonfish

she could also consider equity release - she could then stay in her home with no further repayments and the interest would roll up until death/sale/entry into nursing home

As well as being less stressful for her, she would have more income to enjoy her life.

EdInvestor

Equity release is the answer.

https://www.ship-ltd.org.

Mr_helpful

EdInvestor wrote: »

Equity release is the answer.

www.ship-ltd.org.

You might be right but how can you say it is the answer if the percentage the lender will loan on the equity release is less than the Current mortgage.
We dont know enough to say whether equity release is suitable or not and no one should be able to advise with out a full fact find.
The Op should contact an independent adviser who can also advise on equity relears

EdInvestor

The lady in question is almost 70, and thus is likely to be eligible for a loan ( with no interest payments required) of 40-50 per cent of the value of the property.

I suppose it's just faintly possible that there are houses in the UK worth between 50-60k, but it seems pretty unlikely. :rolleyes:

jamesd

You might consider buying part of the house from her.

An estate agent selling the place would provide a reasonable valuation for the current condition of the property, so she wouldn't need to spend much before selling.

Both equity release and sell and rent back schemes are likely to be worse financial deals for her than selling herself and buying a new place. A new place also has the advantage that it's likely to be smaller and easier to look after and the money freed may allow them to add adaptations that make living in it easier as they grow older. A change from a full house to a one or two bedroom ground floor flat may work out really well with reduced work, reduced bills and better ease of access.

Do they rely on benefits for part of their income? That may affect the decision about what is best, since the capital from a sale may reduce the benefits paid. Alternatively, a significantly cheaper place may provide useful capital to provide long-term extra income for them, perhaps 5% of any lump sum would be available as income producing an extra 10 per week per 10,000 of released equity.

JoeK_3

What is the house value and how much is the outstanding mortgage?

JoeK

MissCellaneous

I don't know what the house value is, but she owes just under 30k I think. It's hard, as she's now on her own, scared to talk about it and doesn't have all her paperwork well organised.

So it's looking like... sell and downsize/rent, or equity release (thanks for the links, just been reading about the two different kinds etc)? In terms of the cons of equity release, I've never expected any kind of inheritance. I don't know how the rest of my family view it, though I reckon they'll feel the same. I'll need to ask her about her level of reliance on benefits as part of her income.

Thank you so much for the advice so far.

JoeK_3

MissCellaneous wrote: »

I don't know what the house value is, but she owes just under 30k I think. It's hard, as she's now on her own, scared to talk about it and doesn't have all her paperwork well organised.

So it's looking like... sell and downsize/rent, or equity release (thanks for the links, just been reading about the two different kinds etc)? In terms of the cons of equity release, I've never expected any kind of inheritance. I don't know how the rest of my family view it, though I reckon they'll feel the same. I'll need to ask her about her level of reliance on benefits as part of her income.

Thank you so much for the advice so far.

Are there any properties in the area for sale, the same or similar to your nan's as there are restrictions on the percentage of property value that can be raised.

For instance, a property valued at £120,000 with your nan's age could raise up to say 33% of the property value on a lifetime mortgage but the value would have to be known to ascertain if this is possible.

Could you find out?

JoeK