How can this be legal?

Eloise69

Thank you all for the replies; my question re the legality is because I don't see how he can reasonably be expected to live until he is 113.

maisie_cat

Upon his death the house is sold and the mortgage repaid, or the beneficiaries keep the house and repay the mortgage

-taff

Has he got any insurances in place?
When did he take out this mortgage [around 2005?] and could he afford to repay the capital with savings for example?

worried_jim

If the interest payment is less than the market rent he is on to a winner- canny move, especially if there is equity. At 95 with 18 years on the mortgage I suspect he isn't too worried.

AnotherJoe

Eloise69 wrote: »

I have recently discovered that my father, aged 95, has an interest only mortgage which expires in 2034.How does this work and what happens when he dies?

It's no different to him having a repayment mortage which doesn't fully repay until 2034. There will be an amount outstanding, and that needs to be repaid from somewhere, sale of the house being the most likely source.

As to your subject "how can it be legal" I'm not sure what your issue is. Why do you think it shouldn't be? I would guess the alternative perhaps 20-30 years ago would have been for him either to take out a full repayment mortgage which he most likely couldn't afford, or would have left him with less money spare than he now has.

In effect he's got what is probably a cheap rental with no chance of being evicted since he is his own landlord.

Thrugelmir

Eloise69 wrote: »

I have recently discovered that my father, aged 95, has an interest only mortgage which expires in 2034.How does this work and what happens when he dies?

Why do you consider it not be legal?

Eloise69

Thanks all for your replies; my question re the legality is simply because I don't see how he can reasonably be expected to live until he is 113.

AnotherJoe

Eloise69 wrote: »

Thanks all for your replies; my question re the legality is simply because I don't see how he can reasonably be expected to live until he is 113.

I still don't see what your issue is.

When he dies the amount remaining needs to be paid from the estate. It's no different to someone much younger dying and still owing money on their mortgage.

What do you think the alternative for your father might have been when he took this out 20 or 30 years ago? Sell and go into rented? Or be forced to get a rental so he owned it when he was 95 or 100?

Seems like he decided he'd rather have the equity in the house paid to him over 20 years than accumulated in bricks and mortar uselessly to him. In effect he's done a DIY equity release at what are almost certainly far better rates than you'd get on an ER scheme.

P.s. The issue with IO is usually someone aged 70 or 80 having the term end and needing to sell and downsize or even rent . Your father has astutely sidestepped that issue.

Eloise69

Hi Joe,
I understand it's a good way to raise money - it is the length of the term that has me puzzled.
Although he is a tough old customer,
Eloise

AnotherJoe

Eloise69 wrote: »

Hi Joe,
I understand it's a good way to raise money - it is the length of the term that has me puzzled.
Although he is a tough old customer,
Eloise

See my ps. Your dad has been very astute, unlike most with IO mortgages who when the term ends are left high and dry. I don't think you could arrange this sort of deal nowadays even though it could be a great idea for the borrower.

Eloise69

Hmm, now I'm wondering how I can get it transferred to myself. No way on earth is my guess.
The reason I was wondering about the legality is the fact that this kind of deal is unheard of these days, or is that just because it is so good?