How can I help my parents with their mortgage?

pablopistachio

My Mum and Dad's mortgage ends in September 2017. They will both be 69 at the time.

The bad news is it's an interest only mortgage that they took out in 2005 to pay off other debts (a lot of which their kids got them into... ahem).

The outstanding balance is £155k. Their fixed rate is very low (less than 1.5% I think) with monthly repayments of £235. They overpay by about £500 each month so the capital is coming down and will be around £145k by the time their mortgage is up in 2 years.

My big concern for them in 2 years is that a lender is only going to offer them a repayment mortgage and only til about age 75 (so 6 years). Even at 0% that's over £2000 a month! If they manage to get a 3% mortgage it's nearly £2500 a month!

The good thing is that my parents have a good superannuation pension so can afford to pay a reasonable mortgage amount til they die, just not £2500pcm.

Possible options I'd love to get some thoughts on:

1) I was thinking I could maybe buy the house off them now at either market value (about £200k) and they pay me back the deposit with the proceeds, or I buy it off them for £145k to cover the mortgage and ideally remortgage myself 6 months later to release the deposit. Would I need to go for a BTL mortgage?

2) I get them to remortgage now for as long as a lender will give them. Even though they won't get as good a fixed rate as they have now, I'm worried interest rates will be up in 2 years and they'll get a lousy deal then. Maybe they can get to 80 and I can help if the monthly is still a bit high.

3) Wait and see what happens in 2 years. As much as I despise banks surely they wouldn't force my parents to sell their home to pay the outstanding capital amount, especially as the mortgage is being overpaid consistently every month? Maybe they'd let them carry on their existing arrangement knowing that their plenty of equity in the home?

Oh and they have life insurance to cover the capital amount if anything happens to one or both of them up to age 75.

getmore4less

No lump sums from the pensions?

elmer

Can they or you not increase their overpayments now whilst it is still on a low interest rate?

Let_Us_See

pablopistachio wrote: »

My Mum and Dad's mortgage ends in September 2017. They will both be 69 at the time. My big concern for them in 2 years is that a lender is only going to offer them a repayment mortgage

Your biggest concern should be the current lender will expect the mortgage to be fully redeemed in 2017, and it is highly likely no other lender will consider a re-mortgage in the circumstances you describe.

Time to find an experienced broker as the longer you delay addressing these issues the worse it is going to be.

Annisele

pablopistachio wrote: »

1) I was thinking I could maybe buy the house off them now at either market value (about £200k) and they pay me back the deposit with the proceeds, or I buy it off them for £145k to cover the mortgage and ideally remortgage myself 6 months later to release the deposit. Would I need to go for a BTL mortgage?

You could discuss that with a mortgage broker, but I strongly suspect that isn't an option at all.

In brief, if you borrow money secured against any house, the lender will want to know they can repossess the house if you stop paying. If you buy from your parents (especially at an undervalue) with the agreement they will be able to stay in the house for the rest of their lives, what happens if you don't pay? Does the lender's right to repossess come first, or your parents' right to stay in the house? Lenders prefer not to get into that situation, which makes it hard to borrow in those circumstances.

pablopistachio wrote: »

2) I get them to remortgage now for as long as a lender will give them. Even though they won't get as good a fixed rate as they have now, I'm worried interest rates will be up in 2 years and they'll get a lousy deal then. Maybe they can get to 80 and I can help if the monthly is still a bit high.

Certainly seeking advice now is a very good plan.

pablopistachio wrote: »

3) Wait and see what happens in 2 years. As much as I despise banks surely they wouldn't force my parents to sell their home to pay the outstanding capital amount, especially as the mortgage is being overpaid consistently every month? Maybe they'd let them carry on their existing arrangement knowing that their plenty of equity in the home?

Why wouldn't they? Your parents promised to pay the money back at the end of the term - and the lender can legitimately expect them to do that.

Are you the child your parents bailed out? If so, do you own a property of your own? It might be easier for you to borrow money secured against your own house than against theirs. Or maybe you could sell yours, give your parents the proceeds, and move into rented? Or maybe something else depending on your actual circumstances.

Edi81

How much is the property worth?
Could they sell and buy something smaller with no mortgage?

pablopistachio

Let_Us_See wrote: »

Your biggest concern should be the current lender will expect the mortgage to be fully redeemed in 2017, and it is highly likely no other lender will consider a re-mortgage in the circumstances you describe.

Time to find an experienced broker as the longer you delay addressing these issues the worse it is going to be.

I was thinking that because they have life insurance until 75 that covers the capital amount in the event something happens to either or both, and because their pension income is more secure than most people's employed in one, there would be no reason why they couldn't remortgage.

Thrugelmir

pablopistachio wrote: »

As much as I despise banks surely they wouldn't force my parents to sell their home to pay the outstanding capital amount, especially as the mortgage is being overpaid consistently every month? Maybe they'd let them carry on their existing arrangement knowing that their plenty of equity in the home?

This a business transaction. Your parents are adults and were fully aware of the predicament that lay ahead when they remortgaged.

My big concern for them in 2 years is that a lender is only going to offer them a repayment mortgage and only til about age 75 (so 6 years). Even at 0% that's over £2000 a month! If they manage to get a 3% mortgage it's nearly £2500 a month!

Interest rates aren't going to remain low for ever. So even an extended term may not be affordable.

Perhaps time to consider other options. How much equity is in the property?

pablopistachio

Annisele wrote: »

You could discuss that with a mortgage broker, but I strongly suspect that isn't an option at all.

In brief, if you borrow money secured against any house, the lender will want to know they can repossess the house if you stop paying. If you buy from your parents (especially at an undervalue) with the agreement they will be able to stay in the house for the rest of their lives, what happens if you don't pay? Does the lender's right to repossess come first, or your parents' right to stay in the house? Lenders prefer not to get into that situation, which makes it hard to borrow in those circumstances.

Certainly seeking advice now is a very good plan.

Why wouldn't they? Your parents promised to pay the money back at the end of the term - and the lender can legitimately expect them to do that.

Are you the child your parents bailed out? If so, do you own a property of your own? It might be easier for you to borrow money secured against your own house than against theirs. Or maybe you could sell yours, give your parents the proceeds, and move into rented? Or maybe something else depending on your actual circumstances.

There would be no other agreement between us than a regular lease and that doesn't supercede the bank's first charge so I was assuming, maybe naively, that they would lend on the same basis. At a glance it seems there are a couple of lenders who will consider the arrangement but I'm sure I'll be paying over the odds for it.

As for the bank not repossessing... yes my parents will have promised at age 60 to pay the capital amount. And just like with all those self certifiers who honestly were earning £80k a year, the bank obviously wanted no proof of this. I'm not one to play the irresponsible lending card, but a bank kicking out two OAPs who have the means to continue paying well over the minimum, who were sold a remortgage without any endownment or other plan in place... would they want that on their record?

Anyway I'm not going to bet on that for one minute. I'll either have to find a lender who'll lend or help them remortgage for as long as possible.

Annisele

pablopistachio wrote: »

There would be no other agreement between us than a regular lease.

A "regular lease" starts to sound like a sale-and-rent-back - and I suspect you want to avoid those if you possibly can.

If you're charging rent, you'll want a regulated buy-to-let mortgage, because you can't let to close relatives on a standard BTL.

If you won't be charging rent, then (apart from the other problems) you'd need to show your income could support the mortgage plus all your other expenses.

There may turn out to be a simple solution to this, but I doubt it involves you taking out a mortgage secured on your parents' house.

Thrugelmir

pablopistachio wrote: »

And just like with all those self certifiers who honestly were earning £80k a year, the bank obviously wanted no proof of this. I'm not one to play the irresponsible lending card, but a bank kicking out two OAPs who have the means to continue paying well over the minimum, who were sold a remortgage without any endownment or other plan in place... would they want that on their record?

When did people stop taking responsibility for their own actions? Where did their £80k a year go. That's the questions you should be asking. As the bank in your words didn't lend irresponsibly. Any irresponsibility was self inflicted by your parents actions. As in your OP they remortgaged to clear other debts.