My dads IO mortgage ending in 2 years

Giles83

Hi,

My Dad at the age of 60 bought his house under the right to buy scheme. He was given a 10 year mortgage and he is now 68 and so this mortgage has to be repaid in 2 years. The mortgage was an Interest only mortgage and so the 100k has obviously never gone down. The mortgage itself was a cash back mortgage and he used the cash to 1) pay off some debt and 2) replace the kitchen and bathroom etc....the house is worth about the same as the mortgage.

I have only found out about all of this now because he has had some ill health last year ( heart attack) and I have begged him to retire. He now tells me he can't stop working full time (often working 60 hour weeks) because he can't afford the mortgage and bills). I have now realised its an interest only mortgage and that he has no way if paying this back. I presume then in 2 years the house may get repossessed and therefore he has worked for all these extra years for nothing to achieve at the end other than bad health .

I am well aware of the stupidity of this whole situation as he was financially much better off remaining a tenant and retiring at the correct age but its done now and I know the house will need to be repossessed, however I thought I might throw it out there to everyone and see if there is anything we could do so he doesn't loose his home. Personally I'd walk away but maybe it's his age but he just seems more upset to not live in this house for the rest of his life than the actual money issues.... Any decent advice would be gratefully received.

magpiecottage

A council house bought under a right to buy scheme will probably have been sold at a substantial discount.

If so, there is likely substantial equity in it which may open the possibility of equity release. That would mean either selling the house to somebody at a substantial discount in exchange for living their rent free for life or (more commonly) taking out a mortgage and simply adding the interest to the loan and paying it all back when the house is eventually sold.

You need to speak to an independent adviser who holds a specialist qualification in Equity Release if you are interest in this.

Giles83

Yes it was sold to him at £55k (ish) and valued at £120k but it was a cash back mortgage so the mortgage value was £100k and now values have dropped a bit it's now only worth about £105k at best. I would do a buy to let mortgage myself but 1) I don't have a deposit and 2) neither he nor I can afford repayments. He has been contacted by a dodgy mis sold mortgage compensation company but as I pointed out, not only are they a scam he was not mis sold the mortgage. He shouldn't have been allowed the mortgage with no way of paying back and not being able to afford it past retirement age , but he must have known that and just not thought it through!

He does have a slightly younger wife. She's about 55 but she earns very little and not enough to solely take on a mortgage of that size.

I wanted him to file for bankruptcy. Loose the house yes but at least all his debts would be gone at his age he could stop working these huge hours that I genuinely believe are causing his continued bad health. But he doesn't believe in doing things like that. He has rarely taken a day off work in his 45 years as a nurse and sees it as shirking out of your responsibilities !! I despair !!!

Cornucopia

Couple of suggestions:-

- Reconsider the mis-sold mortgage idea. At least let the company look into it (as long as that service is free/without commitment).

- Investigate the possibility of the existing lender extending the mortgage on the same terms - they will probably be happy to do this. It'll buy some time to make a considered decision.

- Discuss your Dad's health issues and desire to work, and also check what benefits he would get if he were forced into early retirement.

- You suggested that he has other debts? How big roughly?

BTW it sounds as though you don't mean "cash back mortgage". That is/was a scheme where a lender gave a cash gift to new borrowers. I think what you mean is an additional advance or sum for home improvement.

ACG

I dont really think the mortgage was miss sold - but hey, you never know.

If your dad is in ill health, then i have seen it where the borrower has gone to court to argue that they shouldnt be made to move so long as they carry on paying towards the mortgage. So maybe if your dad can extend the interest only, it could be a way forward (it sounds like going onto repayment isnt going to be possible)... but this is quite a stressful thing to do and given the circumstances it might not be for the best.

Another thought, was your dad sold critical illness insurance? If so, after a heart attack he may be able to make a claim on that.

opinions4u

Are there other debts?

If not, bankruptcy seems a bit extreme. Selling up and renting more appropriate.