Suggestions for 65 yr old with £60k mortgage, £58k assets, pension paid in lump sum

sleepless_saver

The poor house condition may be a problem for equity release providers. https://www.ageuk.org.uk/information-advice/money-legal/income-tax/equity-release/

WillowCat

Sort out the house with the money now, then when mortgage comes to an end she'll be 5 years older and more likely to get a better equity release deal to pay off the mortgage.

bostonerimus

She is going to have to pay off the interest only mortgage at some point so I think the best options are F and D...F would be my preference.

LHW99

It could be possible to pay off a large chunk of the mortgage, so that the remainder could be paid off in 5 years with the same monthly sum she is paying now. Either because this would reduce the amount outstanding on the interest only, or because she could transfer the remainder to a repayment mortgage. It would need some calculations to work out what the numbers would be.
That could leave say £10-20k to do the most important repairs (usually the structural stuff), and once the mortgage is paid off, she would have spare cash to save each month for the remainder.

Arrain19

LHW99 wrote: »

It could be possible to pay off a large chunk of the mortgage, so that the remainder could be paid off in 5 years with the same monthly sum she is paying now. Either because this would reduce the amount outstanding on the interest only, or because she could transfer the remainder to a repayment mortgage. It would need some calculations to work out what the numbers would be.
That could leave say £10-20k to do the most important repairs (usually the structural stuff), and once the mortgage is paid off, she would have spare cash to save each month for the remainder.

Thanks for this.

Using the MSE mortgage calculator, if she paid off £30,000 to reduce the outstanding mortgage to about £30,000 (leaving her with £28,000), and changed from interest only to repayment, her payments would go up from £200/month (interest only) to £550/month (repayment(, if she was clearing the mortgage within the 5 year term. Even if it was 8 years, that would be a little over £350/month on repayment, which I don't think she can afford.

To get to the same amount each month, I think she'd need to get the mortgage down to £11,000 (this would be £202/month repayments over 5 years), so she'd need to pay off £49,000, leaving her with £9,000 to put toward repairs.

The home is badly in need of repairs, and I suspect the £9k would be eaten up just getting the basics done, but as you say it would mean the house was at least not falling into further disrepair at the same rate, and she would be able to clear the mortgage in 5 years.

I guess at that point, if needed, she could look at equity release? I'm just not sure how prudent it is for her to have £150k tied up in equity, and little to no income other than state pension, in a house that's likely to become unsuitable for someone aged 70+. It does seem like it might be the best option though.

Bimbly

I know downsizing would be sensible, but moving -- especially from a treasured home -- would be very disruptive for her. I'm not surprised she wants to stay.

Going from what you have said, it seems the best thing would be to use the savings to do the necessary work on the house. This will also be disruptive, but less so and best to do it now to ensure the upkeep of the property.

Then go for equity release in four years time. I say four years as you will get better rates when she's older and it'll be more expensive than the mortgage she already has, so might as well keep that running until the end.

There are various options for equity release which you'll probably want to look at. But, for example, some offer the chance to pay back a bit of the interest as you go along so there is still equity in the house for inheritance or care fees. She doesn't have to take out all the equity offered in one go and could take the £60k first and then go back for more if needed for a particular expense. Worth looking into in more depth.

Just my personal view from what you have told us. I hope you find a solution that everyone is happy with.

LHW99

There are also (I think) new mortgages which can run until you are over 80 - see
https://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11686590/I-got-a-mortgage-aged-92-tide-turns-for-older-borrowers.html
May not be suitable, but maybe another thing to think about.

atush

Arrain19 wrote: »

I think she will listen to a suggestion that doesn't involve her having to move house. I think the options are:

A) Use the £58k to pay off the mortgage as much as possible, leaving her cash poor but mortgage free
Use the £58k to renovate the property, making it a nice place to live but £60k outstanding on the mortgage and no plan on how to repay it
C) Use the £58k to partially pay off the mortgage, and use some funds to improve the property / perform repairs (not sure what proportion)
D) Equity release in some form - home reversion or lifetime mortgage?
E) Something else not considered?
F) Spend nothing on the property and convince her to downsize.

I think Option B and Option F is a non starter as I don't think she'll ever agree to sell. I wasn't aware of Option D before today, so that's been helpful to find out, but unsure if it's a good idea?

option C followed by D later on maybe

kidmugsy

Arrain19 wrote: »

Use the £58k to partially pay off the mortgage, and use some funds to improve the property / perform repairs (not sure what proportion)

If the property has been badly neglected then you may not have much control over the proportions. Perhaps start by getting estimates for the work necessary to stop deterioration, and then hold back paying anything off the mortgage until you see what the builders discover as they do their work.

GunJack

Rather than change the current mortgage, could she afford at least a small (£100 pm) overpayment on it? If so, that, coupled with some amount of lump sum, could still have the mortgage paid off in the 5 yrs whilst still having enough ls for the repairs....you'd need to do the sums to see if it's possible.