Helping my mother move away from an interest only mortgage

Ally09

TrickyDicky101 wrote: »

When does the current mortgage's term end?

Out of that £1000 pm income, what are the bills your mother currently has to pay (ie what does she have left over after the essentials such as Council Tax, food, gas, electricity, water, TV etc have been paid for?

That will help everyone suggest any options.

If you/your brother move out, is there a realistic prospect that a lodger could be moved in in your place?

Might be a good idea to get yourself over to the Debt Free Wannabe's board to see if further savings could be made to pay down the mortgage debt:

http://forums.moneysavingexpert.com/forumdisplay.php?f=76

She has just under 20years remaining (not so soon after all) but, I’d still like to review her options.

She’s currently paying between 3-4% which equates to around £370pcm. And bills/food cost approx £400-£450pcm (I’m reviewing this to see if it can be reduced).

So, I guess she’d be able to overpay by £100 each month.

She’d have to get a lodger when I move out however, that won’t be for another year or two.

I’ll check out the debt free wannabes board - thank you

warby68

If the house is worth £90-100k with a mortgage still of £86k, then I would wonder whether longer term home ownership is the correct thing for mum, if she is disabled at 50 and relies on the support of family who will be moving out in the next few years ie there isn't much to lose by selling up for more suitable accommodation if her equity is only say £5-£10k after costs.

The obvious short term answer is that the other 2 adults in the house pay something more realistic (in terms of what alternative housing costs would be) than £250pm each and use this money to aggressively paydown the mortgage. In simple terms, with 3 incomes even modest ones there should be scope to tackle an £84k mortgage.

If mum's disabilities are permanent and may worsen a 3 bedroomed (presumably) home will have maintenance and upkeep challenges especially once she is alone. Whilst not wishing to be insensitive, if mum is to be reliant on benefits with possibly worsening health she may be a candidate for social housing that is more suitable and where she will have access to a full package of support for the longer term.

Not sure the numbers are correct yet - an interest only £86k mortgage at 4% would be roughly £287pm not £370. Have you fully checked the T&C, perhaps this is a payment from when interest rates were higher? It doesn't matter much as you want to pay it down but does from the point of view of fully understanding the terms if people are to advise. Also need to know whether overpayments can be made without penalty, how long the rate is fixed for, what happens next etc.

A re-mortgage in mum's name alone looks extremely unlikely but paying down the current one shouldn't be impossible with your help for a year or two if you are certain this is what you and mum want. You can use online calculators to work out what the repayments would be over various terms.

Ally09

warby68 wrote: »

If the house is worth £90-100k with a mortgage still of £86k, then I would wonder whether longer term home ownership is the correct thing for mum, if she is disabled at 50 and relies on the support of family who will be moving out in the next few years ie there isn't much to lose by selling up for more suitable accommodation if her equity is only say £5-£10k after costs.

The obvious short term answer is that the other 2 adults in the house pay something more realistic (in terms of what alternative housing costs would be) than £250pm each and use this money to aggressively paydown the mortgage. In simple terms, with 3 incomes even modest ones there should be scope to tackle an £84k mortgage.

If mum's disabilities are permanent and may worsen a 3 bedroomed (presumably) home will have maintenance and upkeep challenges especially once she is alone. Whilst not wishing to be insensitive, if mum is to be reliant on benefits with possibly worsening health she may be a candidate for social housing that is more suitable and where she will have access to a full package of support for the longer term.

Not sure the numbers are correct yet - an interest only £86k mortgage at 4% would be roughly £287pm not £370. Have you fully checked the T&C, perhaps this is a payment from when interest rates were higher? It doesn't matter much as you want to pay it down but does from the point of view of fully understanding the terms if people are to advise. Also need to know whether overpayments can be made without penalty, how long the rate is fixed for, what happens next etc.

A re-mortgage in mum's name alone looks extremely unlikely but paying down the current one shouldn't be impossible with your help for a year or two if you are certain this is what you and mum want. You can use online calculators to work out what the repayments would be over various terms.

The mortgage agreement is in place until 2032 which gives me enough time to help sort this.

I’ve found that there is a penalty for early repayment. They say: 4th year onwards the charge is equal to interest at the prevailing rate on the amount repaid for the number of days between the date of repayment and the next monthly payment date.

TrickyDicky101

Ally09 wrote: »

The mortgage agreement is in place until 2032 which gives me enough time to help sort this.

I’ve found that there is a penalty for early repayment. They say: 4th year onwards the charge is equal to interest at the prevailing rate on the amount repaid for the number of days between the date of repayment and the next monthly payment date.

Doesn't sound like much of a penalty to me - you would just time any overpayments to be one day before the normal monthly payment goes out.

Have you quoted that term in its entirety? Who is the lender - posters more knowledgeable than me can then comment if that is typical/whether I have interpreted it correctly?

It may simply be a means to ensure the lender knows how the cash amount of the next mortgage payment (eg for short term funding needs) so it may well mean what I have deduced.

getmore4less

The term has changed 3 times,

...
I’ve been told by my uncle that her mortgage is due to come to an end soon
...
She has just under 20years remaining (not so soon after all)
...
The mortgage agreement is in place until 2032

14 years repayment @ 4% is £670pm


You need to find out the full terms of this mortgage.

which lender?

What does it say on the last annual statement?

Castrum

How did you reach a valuation of £90-£100k for the house? Given how muddled the mortgage figures have been, I wonder if this valuation is accurate. Get a free account from Mouseprice.com and have a look at their valuation and what other properties on the street have sold for.

When was the mortgage taken out? I assume it was several years ago as your mother's circumstances would make it very difficult to get a mortgage and the rate seems high.

Ally09

getmore4less wrote: »

The term has changed 3 times,



14 years repayment @ 4% is £670pm


You need to find out the full terms of this mortgage.

which lender?

What does it say on the last annual statement?

Apologies, i know some of the figures are muddled... I don't have it all to hand yet as i'm waiting to get all this handed over (soon, i hope). And i'm having to get to grips with all of this/understand it from scratch.

What i do know

lender/s: the mortgage works (previously kensington mortgages and then derbyshire home loans)
Agreement: was taken out in Jan 2007 and ends in April 2032
borrowed: it looks like she borrowed £81,545
current balance (from last statement): £85995.90
property value: £90k-£100k (based on the sale of my neighbours property last year)
monthly payments: £310.28 (not £370)
On the annual statement it says: rate of interest % 4.300

AnotherJoe

What would rent ona similar property be ?

BorisThomson

ESA plus PIP would be more than £500. Is she subject to deductions? Has she applied for support with mortgage interest (how long has she been claiming for?), and has she declared her income from letting rooms?

macman

The mortgage term now makes sense: a 25 year term commencing 2007, ends 2032. 14 years is a very short space of time to clear £86K: £100 overpayment per month is only going to clear £16,800. Assuming there is around £15K equity in the property (could be much more or less by 2032), that leaves a shortfall of c. £68K to find.
You might consider increasing your rent payments as £250pm each is very cheap indeed-what would a commercial rate be locally? This income is tax free up to £7,500pa, remember.
You are right to push her to address this urgently, unless she is prepared to have to sell the property at the age of 64 and move into rented accommodation.