Interest Only Mortgage - No Separate Investment. Help!

jamesd

You can probably find past selling prices in her street from nethouseprices.com. Then a look at property sales sites will tell you the likely price of a new place.

Add in the effect of reduced council tax, water rates and bills and it'll probably look like a substantially improved situation even with nothing more than a sale and purchase deal.

You and other children could do your own equity release scheme by buying part or all of the new place. That would get her a higher amount of capital than a commercial one.

It's also worth considering her possible future need for residential care. A discretionary trust might be helpful, since it could own the property and may not affect her eligibility for some benefits, though in this case housing benefit would probably not be payable, while it could be if you owned it directly. She could sell the property, place the proceeds in the trust and the trust could then buy the new property and provide her an income today from any surplus. That income could be sustained even while she was in residential care, instead of all her assets being sold to pay for the care. You should definitely seek professional advice for this sort of thing, since details have to be exactly right.

Ian_W

Downsizing is probably the right answer financially even allowing for opportunity costs which can be quite high BUT there are often other considerations which mean it's a non-starter. What and where could she downsize to - if she lives in a small property in a quiet neighbourhood it probably means a smaller property in a less salubrious area - might save on council tax but at what cost to her quality of life with yobs and/or drunks to contend with? Might have really good neighbours who keep an eye on her - my MIL is in that position - and move next to neighbours from hell. The house may have very happy memories of hubby and family which she doesn't want to cut ties from. At 70 she has to want to move - otherwise look at alternatives.

Last - VERY last resort would be sell and rent back. They'll only pay 70-80% of the market value and the tenure for rental is only 6 months, they may allow her much longer but you can't be sure. Some are more a scam to get you to pay costs up front then it's a take it or leave it offer because they've made money already. Avoid.

If you and other relatives can't help out as James has said then Equity Release in one form or another - inc the Halifax one mentioned look to be her best bet. There are a couple of more links to helpsheets from age related charities below:
https://www.ageconcern.org/AgeConcern/Documents/Raising_income_or_capital_from_your_home_FS12.pdf

https://www.helptheaged.org.uk/NR/rdonlyres/84198B3B-A3D7-4FA7-85DD-69DA36696F8D/0/equity_release_advice_guide.pdf

Don't despair and don't let her - there are ways to resolve this - which is right will depend as much on where she would like to live her latter years as what is right financially.
BoL.

chivers1977

The other arguement that moone else has mentioned - why does your nan have no repayment vehicle. Did she ask for one and it wasnt set up... how did c&g let her get into this position? When did the mortgage start as old Io nirtgage would have the endowment assigned to it. depeneding on the answer above you could make an underfunding claim and the bank would have to meet the payments as if your nan had been oaying on a repayment mortgage the whole time............

JoeK_3

jamesd wrote: »

You can probably find past selling prices in her street from nethouseprices.com. Then a look at property sales sites will tell you the likely price of a new place.

Add in the effect of reduced council tax, water rates and bills and it'll probably look like a substantially improved situation even with nothing more than a sale and purchase deal.

You and other children could do your own equity release scheme by buying part or all of the new place. That would get her a higher amount of capital than a commercial one.

It's also worth considering her possible future need for residential care. A discretionary trust might be helpful, since it could own the property and may not affect her eligibility for some benefits, though in this case housing benefit would probably not be payable, while it could be if you owned it directly. She could sell the property, place the proceeds in the trust and the trust could then buy the new property and provide her an income today from any surplus. That income could be sustained even while she was in residential care, instead of all her assets being sold to pay for the care. You should definitely seek professional advice for this sort of thing, since details have to be exactly right.

You're right there James and the complexities involved.

Who said equity release was easy?
JoeK

dunstonh

The other arguement that moone else has mentioned - why does your nan have no repayment vehicle. Did she ask for one and it wasnt set up... how did c&g let her get into this position

C&G never used to sell insurance. It was one of their big selling points from an advertising point of view. They would tell people to use the services of an IFA.

Leon_W

It matters not whether C & G sold endowments or not. The onus is on the mortgage holder to ensure that there are adequate provisions made for the repayment of the capital at the end of the term.

And it's no use saying "well I didn't realise" because lenders write to you annually telling you that your mortgage is interest only.

dunstonh

Another thing is that when you signed the offer letter in front of the solicitor, he/she would go through the terms of the mortgage with you to make sure you understood the contract before you signed it. This would include needing to make sure the money is paid back at the end of the term.

Nowadays, a lot of people dont use the solicitor on anything other than purchases but in the past, use of solicitor was the norm.

MissCellaneous

Thanks for all the help guys - there's a lot to think about, and the next thing I'm going to do is have another good chat with nan about what she wants, armed with this info, and find out how much her house is worth.