Uncle sold a mortgage that finishes when he's 104

tumbledowngirl

My husband's uncle died last week, at the age of 84.
We are having to deal with his estate and have found paperwork for a mortgage sold to him 20 years ago. The original amount borrowed was just under £4, for a new kitchen. The term is 40 years, with total repayment of over £19k.
A brief look at recent mortgage statements suggests that he's owes more at the end of each year than he did at the start, due to interest.
There's still 20 years left to go.


Can anyone shed any light on what on earth's gone on?

Bonfire_Bride

I'm guessing you mean £4,000?


That is insane. How much are the monthly installments? Sorry I can't offer any advise, but I'm sure others will be around shortly.


Can't believe companies can get away with things like this.

tumbledowngirl

Yes, sorry I left the k off the £4!
The monthly repayments appear to be around £10.
Insane indeed, especially as the lender is one of the big high street names.

Thanks for your response - glad to know I'm not wrong in feeling like something is seriously wrong here.

Thrugelmir

The amount required to settle the debt is what is owed now. Perhaps your late Uncle was happy to pay the minimum amount he could. Knowing that any balance would be settled after his death upon the sale of the property. Was his money to do with as he wished.

Mortgages aren't sold they are applied for.

ACG

tumbledowngirl wrote: »

Can anyone shed any light on what on earth's gone on?

My guess...He applied for a loan/mortgage to buy a new kitchen.
He was given the loan.
He bought the kitchen.

Fair play to him, if hes living on a pension why would his priority be to clear a debt when he could have more free cash to spend on whatever he wants?

tumbledowngirl

I'm confused.
If that's the case, why doesn't every mortgage lender agree to a term of indefinite length? 40 years, from the age of 64 seems a bit extreme.

WestonDave

tumbledowngirl wrote: »

I'm confused.
If that's the case, why doesn't every mortgage lender agree to a term of indefinite length? 40 years, from the age of 64 seems a bit extreme.

Because in some cases the accumulated interest and capital would outweigh the value of the property securing it. In your case, he's owing £19k over 40 years, so after 20 years and having paid back £10 per month its probably nearer £10k - which in terms of a property even in the Welsh Valleys is going to be recoverable. In effect he's done an equity release type of thing - he's borrowed against the value of his home to have a better standard of living now - knowing that the house will clear the debts when he's gone. If that was clearly understood by him and the lender at the outset I don't see the issue.

ViolaLass

OP, he can't have owed more at the end of each year, otherwise the debt would never have been paid off.

Or was it an interest-only one? In which case, as others have said, why not?

tumbledowngirl

ViolaLass wrote: »

OP, he can't have owed more at the end of each year, otherwise the debt would never have been paid off.

Or was it an interest-only one? In which case, as others have said, why not?

I'm guessing it's an interest only mortgage - looking at the last statement, the interest for the year is more than the payments made.

ViolaLass

tumbledowngirl wrote: »

I'm guessing it's an interest only mortgage - looking at the last statement, the interest for the year is more than the payments made.

That still doesn't add up. An interest-only mortgage involves paying all the interest (just no capital).

Were some payments missed perhaps?

kingstreet

I suspect it's a Halifax Retirement Home Plan?

It was possible to have interest only and the idea was to repay the capital from the property sale proceeds on death or from the estate.

It was the first real lifetime mortgage widely available.