Older persons with mortgage diemma.

GoodSon

Genuinely asking on behalf of a friend.

His parents in law are both retired and looking at their mortgage and possibly clearing it after lender contacted them for settlement - I assume the term of the mortgage is up.

FIL - 68 on full state pension plus prison service pension - in remission for bladder cancer & has early stage parkinsons.
MIL - 66 on full state pension - health is OK at best, though no diagnosed conditions.
Joint income of c£2800 per month

They have a bungalow worth c£140k with c£67k outstanding on an interest only basis and sounds like there is / or has never been a vehicle in place to cover this amount.

There is talk of downsizing which he is ok with, but wife is reluctant at this stage.

Lender is Northern Rock and it seems that they have an interest rate of around 6% - seems high!
NR have offered to convert the £67k into a mortgage, but through its term would equate to c£200k in repayments - ouch!

However, they have savings and ISA's of c£55k and a the daughter / son-in-law happy to chip in with payments.

They live frugally, small car, holidays in UK so no extravagant lifestyle choices - ultimately I think the plan is to leave it all to the grandkids.

Obviously this is a second hand conversation, so it would be hard to furnish you with any specifics as these are just the broad brushstrokes of the situation.

I'm tempted to tell him to get them in touch with a whole of market mortgage broker or have them think more about the downsize option and clear some / all of the balance with the savings.

It would also be less complicated for the daughter / son (however willing) to stay clear of becoming financially / legally involved, I would think.

So, as I say, it's a conversation in the pub where the details are a little sketchy, but hopefully there is enough to give a few pointers for them to explore.

Thanks for reading.

amnblog

A conversation with a whole of market independent broker is definitely the way forward.

My biggest concern would be the situation for MIL if left with the debt and a widows pension.

Thrugelmir

GoodSon wrote: »

NR have offered to convert the £67k into a mortgage, but through its term would equate to c£200k in repayments - ouch!

Are you expecting an interest free loan?

Clearing the debt totally maybe the best approach. Given the state of health of your FIL and to protect the interests of your MIL.

ACG

There are options, it all depends on what they want.
Equity release could be an option, they have products where you can make repayments if you like so for all intents and purposes it works like an interest only mortgage.

Probably is one for a broker but I suspect there will be options.

GoodSon

Hi Thrugelmir - It's not my family - honest.

I do agree, it's just a bit of an eyewatering amount so late in life.

General consensus would be a broker and for a change in attitude that, perhaps in their case, money in the bricks and mortar are just a good as the physical cash in the savings.

missbiggles1

GoodSon wrote: »

Hi Thrugelmir - It's not my family - honest.

I do agree, it's just a bit of an eyewatering amount so late in life.

General consensus would be a broker and for a change in attitude that, perhaps in their case, money in the bricks and mortar are just a good as the physical cash in the savings.

If they use most of their savings to pay off the current balance it won't be eyewatering and repayments will probably not more than they pay now.

Will she get 50% of his prison pension when he dies?

GoodSon

missbiggles1 wrote: »

If they use most of their savings to pay off the current balance it won't be eyewatering and repayments will probably not more than they pay now.

Will she get 50% of his prison pension when he dies?

I would have to assume yes as well as an uplift of the state pension based on his contribtions as I doubt she has a FULL state pension after having 2 kids (1 deceased) in the 70's.
I tend to agree that rebuilding the savings would also be possible based on the level of income vs reduced outgoings.
Thank you.

missbiggles1

GoodSon wrote: »

I would have to assume yes as well as an uplift of the state pension based on his contribtions as I doubt she has a FULL state pension after having 2 kids (1 deceased) in the 70's.
I tend to agree that rebuilding the savings would also be possible based on the level of income vs reduced outgoings.
Thank you.

You get NI credits when you're at home with children so she may have more than you think.

I'm a similar age and not dissimilar situation and wouldn't think that rebuilding the savings would be a major priority as long as there's a reasonable pot to cover emergencies. You don't want to make too many economies when one of you may have only a comparatively short time to live.

GoodSon

missbiggles1 wrote: »

You get NI credits when you're at home with children so she may have more than you think.

I'm a similar age and not dissimilar situation and wouldn't think that rebuilding the savings would be a major priority as long as there's a reasonable pot to cover emergencies. You don't want to make too many economies when one of you may have only a comparatively short time to live.

Knowing the chap as I do - he's tight - in the nicest possible way, but I do know he would never see anyone of his family go without, so the trick here will be to convince him to hand over a lump of cash for the greater good.

Anyway folks, thank you all for the replies and you all pretty much have the same view as me for how they proceed.

I'll suggest to my mate a cards on the table meet with a broker and take it from there. The situation is nowhere near as bleak as the couple in question seem to believe. They are a bit old school I guess.

Thanks again.