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

Arrain19

My mother is 65, single and lives in the north of England. She has mental health issues and is currently unwilling to move from her home, which was our family home prior to my parents' divorce. My hope for this post is that I can get some advice on presenting a sensible plan for her future.

The property is estimated to be worth £200,000 in good condition, however the property is in a state of disrepair and requires significant updating, e.g. new kitchen, new bathroom, new electrical wiring, replastering throughout due to damp, new windows etc. I have a friend who is a builder and property developer, who estimated he would spend in the region of £50,000 - £70,000 on updating the property.

I'd therefore estimate the property to be worth about £150,000 in its current condition, taking into account the repairs and updating required.

My mother has the following major liabilities:
- Outstanding mortgage of £60,000 which is currently interest-only, as she cannot afford to make repayments to the capital; 5 years remaining on the mortgage term.

She does not work (has not worked for 13 years now) and is unlikely to get a job due to mental health issues and alcohol dependence. She receives disability allowance, and has the following assets:
- £8,000 remaining from a workplace pension lump sum she took
- £50,000 inheritance from my grandmother following her death

My mother wants to use the full £58,000 to pay off the majority of the mortgage, however given the house is in such a state of disrepair, I worry that this will leave her with an unsafe and unhygienic property that will only get worse, without her having the funds to maintain the property, and no funds left for her retirement.

Any suggestions? I thought she'd be better off downsizing?

ACG

If she pays down a portion of the balance - no idea how much but say £30k. What would that reduce the payments to?

Could she then keep her payments at the same amount and effectively pay down the remaining balance? It may take more than 5 years to clear the remainder, but if it works out at a balance of £5-10k and it will take another say 2 years to clear then the lender is unlikely to push for a repossession as they can see see your mother is working towards clearing the balance and the bad reputation it could bring trying to evict a pensioner etc is probably not worth it to them...obviously this is me making an assumption on the decency of a bank - I could be completely wrong.

jaybeetoo

Please don!!!8217;t post the same question in 2 forums

Arrain19

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 to £550/month, 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, 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.

The home is badly in need of repairs, and I suspect the £9k would be eaten up just getting the basics done.

Would she be better off looking at equity release - home reversion or lifetime mortgage?

Arrain19

jaybeetoo wrote: »

Please don't post the same question in 2 forums

Apologies, I read the forum rules before posting and didn't see anything about not posting in more than one forum; I thought it would make sense to post in Mortgages & Endowments and also in Retirement Planning as I wasn't sure which one it fell into.

xylophone

If your mother sold the house and repaid the mortgage, would she have enough to buy outright a more suitable property close to friends and family?

sal_III

xylophone wrote: »

If your mother sold the house and repaid the mortgage, would she have enough to buy outright a more suitable property close to friends and family?

Might not be an option according to OP:

Arrain19 wrote: »

She has mental health issues and is currently unwilling to move from her home

The question here is if she spends the capital on renovation of the house, what will happen in 5 years when the mortgage is due? Sell and downsize? This will mean a loss of £6000 in interest payments for the next 5 years. Might be better to bring her to terms that she needs to downsize/move now.

Instead of looking at release of equity / lifetime mortgage "scams", is it an option for you and/or your siblings to pay for some of the repairs essentially investing in/protecting your inheritance and make your mother's life less miserable?

Arrain19

xylophone wrote: »

If your mother sold the house and repaid the mortgage, would she have enough to buy outright a more suitable property close to friends and family?

This is what I think she should have done, years ago. I think she could...

£150k from sale of property - £60k mortgage = £90k released from sale of property.
£90k + £58k assets = £148k total assets.

So I think she could buy somewhere for £125k and still have close to £20k remaining, however I'm not sure if this is prudent retirement planning (is £20k enough to last? could she then do equity release from her new home?)

However, one major thing to consider is that I really don't think she will ever sell or move. She is adamant that she wants to stay in the house she's in (she has mental health issues and is alcohol dependent, and attempts to persuade her even consider moving to somewhere more suitable are always met with a very firm no).

Arrain19

sal_III wrote: »

Might not be an option according to OP:

Might be better to bring her to terms that she needs to downsize/move now.

Instead of looking at release of equity / lifetime mortgage "scams", is it an option for you and/or your siblings to pay for some of the repairs essentially investing in/protecting your inheritance and make your mother's life less miserable?

Thanks for your reply. I agree with you, the house is too big for her, and it's unsafe & unhygienic, however I don't think she will ever consider moving, unfortunately.

I don't have any siblings, and unfortunately there are no other family that could or would help. I'm 36 and trying to buy a house with my partner, and we have only just reached the point where we have enough for a deposit for our own home (we currently rent). I had considered what you're suggesting, i.e. to pay for the repairs etc, however I'm somewhat reluctant to do this for a few reasons (though I do often give it a lot of thought):

- My mother has borderline personality disorder and frequently cancels work, or changes it if I arrange it; I've had many instances in the past where she's agreed to let me organise necessary work, only for her to then refuse to let workmen into the property when they arrive
- She perceives any outside help as interfering, and I'm more likely to get abuse for trying to help, i.e. it wouldn't be appreciated
- I'm trying to buy a house for myself and my partner, and think it would be unfair on my partner to put my mum's finances ahead of ours, given that I think my mum has sufficient assets to improve her situation, if she only had the will do to so
- She doesn't maintain the property or look after it (or herself), so I suspect it wouldn't be a one-time cash outlay, it would need ongoing commitment.

My mother fell and broke her hip 10 days ago and while she's been in hospital, I've taken the opportunity to get some of the critical items done, e.g. paid around £900 to get some repairs done, e.g. fixed broken windows at rear of property and secured the back door which was badly damaged, had guttering fixed to reduce damp damage, unclogged drains, cleared soot damage from the kitchen ceiling and walls where she had a kitchen fire 5 years ago and did nothing to clean it up, hired a skip and 2x cleaners to come in cleaned up the property (I took time off work and spent days at the property doing this).

So, I'd certainly consider it, but as it stands I'm leaning towards not doing this.

Arrain19

In other words, I feel like I can clean the place up and make it secure, but the 'big ticket' items like needing the roof fixed, replastering, new wiring, new bathroom etc I'm not convinced I could or should do, and even if I could, whether this is the best use of money available.

sal_III

I sympathise with you, I have a vaguely similar situation in my family with my Father's aunt who has MH issues and refuses to allow for any repairs to the dilapidated property she lives in, while my Father owns 25% via inheritance. He just gave up at the end.

Seems like you are going above and beyond in your effort to support your mother, but sometimes there is only that much you can do. Then it's time to look after higher priorities like your new family.