Concerned for my mum!

stephaniem30

Hello

Wondering if anyone can offer some advice. My mum bought a flat for £75,000 a few years ago when the market was better. She has stupidly been paying interest only. Now she's had to retire due to to ill health and Im worried she will not be able to cope with the payments when they come off the interest only 5 year period. Can anyone offer any options, selling the flat is not optional as the prices have dropped dramatically and the current rental covers the mortgage and just a bit more.

Thank You

getmore4less

If it rented where does she live

Why can it not be sold?

value
mortgage details size, rates, term,
rent
income

other assets

gb12345

stephaniem30 wrote: »

Im worried she will not be able to cope with the payments when they come off the interest only 5 year period.

Do you mean comes of fixed rate period? Not heard of a mortgage that is interest only for a fixed period and then becomes repayment.

How does she intend to pay off the mortgage when it expires?

Southend1

gb12345 wrote: »

Do you mean comes of fixed rate period? Not heard of a mortgage that is interest only for a fixed period and then becomes repayment.

How does she intend to pay off the mortgage when it expires?

I'm sure there used to be some FTB mortgages that were interest only for a few years before reverting to repayment. I seem to remember a friend of mine had one. Can't remember the name of the product though, maybe something like easy start or low start?

ETA - yes it's low start. Here's an example http://www.telegraph.co.uk/finance/personalfinance/9812119/Money-MoT-Clydesdales-interest-only-low-start-mortgage.html

kingstreet

That Clydesdale offer's brand new. The only other interest-only for a fixed period I can remember was an HSBC deal, which I think was for three years, but that would be well over by now.

I suspect the OP is getting the fixed period confused with interest-only?

GMS

Take it this is a Buy to Let? Who is the mortgage with? Was the original mortgage fixed for 5 years for the rate rather than the term being 5 years?

gb12345

Thanks for that Southend1.

That type of mortgage makes sense for someone who is likely to be seeing an increase in income in the future (a young professional just starting out in their career for example), but not for a middle aged (or older?) woman who is unlikely to see a significant income increase, so I would question the advice given at the time the product was sold to her. All it has achieved is cutting costs in the short-term, but greatly increasing them for the remainder of the mortgage.

@OP -
How long is left to run on the on interest only period?
What is the current value of the property and how much was the mortgage for?
How long is the total term of the mortgage
How old was your mother when she took out the mortgage?
Would rental income cover capital and interest at the end of the fixed period? Also, are there any service charges and would she be able to afford those.

The main problem that she has is that an unforeseen occurrence has occurred (the early retirement) and even if she had been sold a standard repayment mortgage, I would question whether she would now be able to afford that on her reduced income.

I assume that selling is not an option because she has negative equity, so renting may well be her only option.

kingstreet

I think GMS and I both see this as a BTL product/purchase and it's completely normal for it to be interest-only.

The question here is likely to be either;-

- was the mortgage for just five years?
or
- is the OP confusing the term of the fix with the term on interest-only?

gb12345

kingstreet wrote: »

I think GMS and I both see this as a BTL product/purchase and it's completely normal for it to be interest-only.

Having reread the OP and the mention of "current rental" I would be inclined to agree and as you say interest only in that case it perfectly normal.

So the real question is what is happening at the end of the 5 year period - will it go to variable rate or is that the end of the mortgage and she faces having to pay back the capital.

Poppy9

OP if your mother is renting this house I assume she owns another house she lives in.

If this is the case her choices are -

• Sell rental property and take out / add to mortgage on current house the shortfall.
  
• Sell the property she lives in and move into the house she rents. Any equity she gets from the sale of her own home she can use to reduce the mortgage.
  
• Sell both properties and buy somewhere different.