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Taking on parents' debt V equity release
Ping42
Posts: 10 Forumite
Hi all - advice and opinons would be greatly appreciated.
We have just discovered that OH's parents have a mortgage of almost £40,000. They took this out when they were 65 & 63 over a 10yr repayment period and this still has 7years to run and the 40k is the outstanding balance.
I'm assuming it was a ridiculous interest rate because of their age but they can no longer afford the repayments as SURPRISE, their circumstances have changed. One no longer has a job and the other would like to give up their job but cannot until the mortgage is sorted as they need the income to survive.
They have no way of paying off the mortgage, no other likely income etc so are looking at equity release as their only option.
They have plenty of equity in the h ousebut they don't want to move.
We don't want them to do this because 40k in 10years will be 80k (or thereabouts) and I worry that they will need to move at some point in the future as the house may not be suitable for one or both of them in the future.
Anyway, question I'm asking is... How easy would it be for us to take on the mortgage on an interest only basis? We couldn't afford their current repayment option but could afford interest only. We have plenty of equity in our own home but would want to seperate all of this. We also will have means to pay off the lump sum in around 9/10 yrs time if necessary.
I'm assuming we'd need to get them to agree to joint ownership of the property?
We obviously need to get proper independant advice but thought I'd sound out this forum for views, knowledge first as we're a bit overwhelmed..... and angry.
It seems wrong to sell a mortgage like this to people their age when they need to be in employment to stand any chance of paying it back. Not to mention ridiculous to take out a mortgage in these circumstances.:mad:
We have just discovered that OH's parents have a mortgage of almost £40,000. They took this out when they were 65 & 63 over a 10yr repayment period and this still has 7years to run and the 40k is the outstanding balance.
I'm assuming it was a ridiculous interest rate because of their age but they can no longer afford the repayments as SURPRISE, their circumstances have changed. One no longer has a job and the other would like to give up their job but cannot until the mortgage is sorted as they need the income to survive.
They have no way of paying off the mortgage, no other likely income etc so are looking at equity release as their only option.
They have plenty of equity in the h ousebut they don't want to move.
We don't want them to do this because 40k in 10years will be 80k (or thereabouts) and I worry that they will need to move at some point in the future as the house may not be suitable for one or both of them in the future.
Anyway, question I'm asking is... How easy would it be for us to take on the mortgage on an interest only basis? We couldn't afford their current repayment option but could afford interest only. We have plenty of equity in our own home but would want to seperate all of this. We also will have means to pay off the lump sum in around 9/10 yrs time if necessary.
I'm assuming we'd need to get them to agree to joint ownership of the property?
We obviously need to get proper independant advice but thought I'd sound out this forum for views, knowledge first as we're a bit overwhelmed..... and angry.
It seems wrong to sell a mortgage like this to people their age when they need to be in employment to stand any chance of paying it back. Not to mention ridiculous to take out a mortgage in these circumstances.:mad:
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Comments
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It's likely that the cheapest option is to remortgage your own home.
Interest only mortgages are pretty hard to come by.
If you become joint owner of your parents home do remember that there may be capital gains tax on your share if it is sold.
Can you really afford the repayments?
What if your financial siuation changes?
One really needs to know the full financial facts for both you and your parents.
Maybe they should sell up and downsize?EU tariff on agricultual product 12.2%
some dairy products 42.1% cloths 11.4%
EU Clinical Trials Directive stops medical advances0 -
1) Could you remortgage your own house with a repayment mortgage but with a long life - 30 years, 40 years? That would cut your monthly payment.
2) If you lent the money to the oldsters to clear their debt, could you then secure the loan with a charge on the property? You'd then want to use a lawyer to set it up, including what to do about repayment of the loan.Free the dunston one next time too.0 -
Maybe they should sell up and downsize?
That's exactly what they SHOULD do, but isn't going to happen I don't think. They shouldn't have bought what they couldn't afford in the first place.
It just seems so wrong to let them lose so much money.
We overpay our mortgage every month to pay it off early, so am not keen to then add 40k to it. Was thinking interest only would be affordable until we/they sell or we pay it off in a few years.0 -
That's exactly what they SHOULD do, but isn't going to happen I don't think. They shouldn't have bought what they couldn't afford in the first place.
It just seems so wrong to let them lose so much money.
We overpay our mortgage every month to pay it off early, so am not keen to then add 40k to it. Was thinking interest only would be affordable until we/they sell or we pay it off in a few years.
It's nice and good of you to show concern, even though they appear to have been financially reckless whilst you are sensible. However you shouldn't put your position in jeopardy, particularly if they aren't prepared to sensibly address he mess which they have put themselves into.0 -
We have just discovered that OH's parents have a mortgage of almost £40,000. They took this out when they were 65 & 63 over a 10yr repayment period and this still has 7years to run and the 40k is the outstanding balance.
They have no way of paying off the mortgage, no other likely income etc so are looking at equity release as their only option.
They have plenty of equity in the h ousebut they don't want to move.
We don't want them to do this because 40k in 10years will be 80k (or thereabouts) and I worry that they will need to move at some point in the future as the house may not be suitable for one or both of them in the future.
I know you say they are unwilling to move at the moment but it's far easier to move at their current ages than in some years time when a move might be forced on them because of poor health or the need to repay the mortgage.
If they did move now, they will have time to establish themselves in a new community.
Would they consider doing a pros and cons list of staying where they are - including the risks you might take by finding the money for their mortgage - and the option of moving?0 -
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We have just discovered that OH's parents have a mortgage of almost £40,000. They took this out when they were 65 & 63 over a 10yr repayment period and this still has 7years to run and the 40k is the outstanding balance.
Is it worth seeing if there is a case of them being missold the mortgage?0 -
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Thrugelmir wrote: »On what grounds?
To take out a mortgage when you are 65 is unusual. I don't know what advice they were given. If they can't afford the repayments has something changed or was their pension never going to be enough to repay the loan?
I just feel it is something worth exploring if only to discount it.0 -
To take out a mortgage when you are 65 is unusual. I don't know what advice they were given. If they can't afford the repayments has something changed or was their pension never going to be enough to repay the loan?
I just feel it is something worth exploring if only to discount it.
No one forced them to do it, the primary duty on any institution lending money is to determine the probability of that money being paid back.
The one option the OP ccould consider is paying the equivalent sum of interest only if that would be enough to allow the parents to make the rest of the payment. However it doesn't sound as that would be a guaranteed solution, it's their lives and they need to find a solution which is suitable.0
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