Mortgages for unemployed?

MrsC82

Is there such a thing?? - Benefits only income 12k pa. (A broker advises no such product exists)

My mum just turned 55 planned to take her pension as a lump sum. She wants to retrain as a driving instructor. She's unemployed (after working over 30 years in catering). She has back troubles has had surgeries etc limiting the positions she can do and wants to be able to work on her own terms. She'd also like to do some renovations on her house and take a family holiday as she's never had one.

The pension which she signed up to very young with no real understanding had about 10 years of contributions then was frozen and forgotten about. Currently it's making about 5k per year. I don't know much about her pension or even pensions in general but the last 3 years statements each show a gain averaging 5k.

She was told if she took the 25% tax free bit, the rest would be moved in to a current investment and would make much less yearly. Its total value at £53k currently.

So I'd suggested she looks at releasing equity from her house (£80k value mortgage free).
Because the interest on a mortgage is much lower to pay compared the the bonus gains on her pension. EG if 15k mortgage over 5 years had a 17k repayment...... then if she only made 3k per year on her pension in a worst case, she's still made herself £15k in her pension which far outweighs the 2k borrowing cost.

Interest only mortgage would have been preferable vs an unsecured loan as the repayments on an unsecured loan would reduce her disposable income and make life tight.
I'd have thought with 65k equity left in the property and a pension lump some to fall back on to repay the capital at the end would have been an easy deal??

FYI this is my logic - I'm happy to be educated.

[Deleted User]

I would think that the unemployment, the reliance on benefits and the very small mortgage being requested make that a non-starter.

MovingForwards

Depends on what the benefits are as to whether a mortgage can be obtained.

Possibly wouldn't be viable to do equity release on the home due to its value.

She needs to speak with a whole of market mortgage broker.

As your mom has back issues and has to be careful about her positions an instructor may not be the best option.

MrsC82

Deleted_User wrote: »

I would think that the unemployment, the reliance on benefits and the very small mortgage being requested make that a non-starter.

Are you saying she'd have a better chance if she asked to borrow more?

I have offered to make a joint application with her as I work full time and do have my own mortgaged properties. She might consider it as a last resort. She doesn't like the idea of having to change the deeds and the thought that I'd have an interest in her property that she's worked hard for all her life. (We have been known to butt heads and fall out for a year or two here and there.)

Thanks

MrsC82

MovingForwards wrote: »

Depends on what the benefits are as to whether a mortgage can be obtained.

Possibly wouldn't be viable to do equity release on the home due to its value.

She needs to speak with a whole of market mortgage broker.

As your mom has back issues and has to be careful about her positions an instructor may not be the best option.

Sorry when I say release equity I don't mean via an equity release scheme I mean by mortgage. She was offered an equity release recently they'll give her 18k and they want her house within 20 years or something like that she said....she was not up for that.

"Careful about her positions" - she's able to sit and lie down, but can't stand or walk for more than 4/5 minutes. When I say positions I mean job roles...my mum has always been a worker the last couple of years have been hard on her. She's deemed as fit for work because she can walk 100 yards in said 4/5 minutes. She tried to do checkout operator but there was too much twisting. She's only worked in catering, she has no computer skills, no typing skills so wouldn't get any office/call centre work (as she's found from previous applications). Can't go back to catering because she can't stay stood in a kitchen. Can't do delivery driving because she can't lift/carry. My daughter recently started driving lessons with an instructor, my mum was shocked at the £30 per lesson charge and has been taking my daughter out for extra practice and thinks it's something should could do and could make a good income from for the next 10/15 years before she reaches state pension. Hence her wanting to retrain at 55 years old.

She spoke to L&C broker they said there isn't a mortgage someone on universal credit.

sal_III

The mortgage question aside (others more qualified than me have already confirmed your broker opinion).

Does your mum know all of the expenses associated with being a driver instructor? I'm always amazed how people jump into business ventures not knowing the full facts, just because they see the large income, with no considerations to costs.

calleyw

sal_III wrote: »

The mortgage question aside (others more qualified than me have already confirmed your broker opinion).

Does your mum know all of the expenses associated with being a driver instructor? I'm always amazed how people jump into business ventures not knowing the full facts, just because they see the large income, with no considerations to costs.

Also there is all the finance side for tax, such as keeping track of everything. Yes you can give it to accountant to do. But you still need to know the basics. Which the op says her mother has no computer skills.



And its also about working odd hours. Lots of people learning to drive want evening and weekend lessons. Also have to be a very calm person who does not get upset or angry easily. And see the car as a work tool as it will get bashed and banged and dinged.


Yours


Calley x

ACG

Did you go to a fee free broker?
£15k mortgage would be around £50 commission.
If you think:
1 hour factfind,
3 hours research,
1 hour submission,
2 hours back and forth,
1 hour admin.

---

8 hours work - realistically for this case, that is probably quite low.

So £50 / 8 = £6.25 an hour.

Then you have:
Compliance costs,
Insurance Costs,
Tax.

The broker would be lucky to come out with £5 an hour.

That is also added to the fact your mother is probably classed as a vulnerable person which then incurs more compliance procedure and work.


Why does your mum not try and get a loan for home improvements? Or get an equity release mortgage that allows overpayments? I think you need to be prepapred though, if you go to a proper broker who will place this case, they are going to charge a fee and that is purely because there is no commission in it.

To put this in to context, if I charge our maximum fee of £750, I would still be earning less than our average case income. This is why I think a loan may be more beneficial, the rate of a loan may be higher but probably not high enough to make it more expensive than paying a brokers and lenders fee.

TBagpuss

I don't think she will able able to get a mortgag wherre her only income is from benefits.

If she was working part time then some lenders will take into account (some) income from benefits as well as your earned income, although they will all have their own criteria about which benefits, how much of your income from benefits they will count et. (e.g. suppose she was earning £500 a month and receiving £600 in benefits, a lender might say tat they only allow up to 1/2 of your total income for borrowing purposes to come from benefits, so they might count her total income as £1,000, not £1,100 as they apply a cap to hw much of the benits they will count)

You mentiond that you would be willing to go onto a joint mortgage - would you be able to borrow extra on your own mortgage, and lend her the money, on the basis that she repays you on receipt of her lump sum ? If you are willing to take the risk that might work, you would of course need to make sure that youtook proper advice and had a proper legal agreementdrawn up to secure your loan - she might then be able to get a mortgage if/when she starts to work and to then pay you back early.

TBagpuss

She could also, on a spearate note, look into whether there are any free or low cost training courses she could attend toget some basic computer skills so she could then apply for office or call centre work. I suspect that would be a lot cheaper tan trying to set up and run your own bsuiness from scratch.

I would also have some reservations about work as a driving instrcter given her health issues - lots of very jerky movements as students learn clutch control and braking, plus all the emergency stops - I would have thought it could be a nightmare for someone with back problems (your daughter presumably had her initial lessons with an instructor and is now past that stage?)

She might also find it worth while to look at other retial jobs - I can see that checkout in a supermarket would be a problem due to the movements, but she might be able to manage better in a different type of shop - and could potentially ask for a stool if the cahsiers normally stand, as a reasonable accommodation for disability.

MrsC82

Thanks for the replies - without taking ages to quote all of them.

It was a fee free broker - I note your comments and understand what you're saying.

She's done a lot of research into being a driving instructor - I will highlight to her the emergency stop statement that is a very valid concern that I hadn't thought about I'm not sure if she has. But she's looked at setting up on her own and hire/franchise she knows that her initial course is £1000 then she has all of the modules to pass and has to have 70hours training.... I have likely glazed over a bit while she's gone on about it but I know the majority of her cash will be for this. I think she said she was looking at about 7-10k to get on the road. She's already paid parts of this and is about to get underway.

The odd hours work for her since my dad passed she's bored and lonely an awful lot this will get her out.

Re computer courses - I think she's done about 4 now and I still have to send her CV on email for her and I roll my eyes when she still can't copy/paste.

She's good at pen and paper and maths and can sit and keep her records. Before my dad died he drove taxi's before his retirement - she managed his accounts and did his tax returns...I'm sure i heard on the radio it's gone/going computerised so I'll get roped in there. I'm AAT qualified but hated accounting and went to IT Support instead. So worst case it'll be me on paperwork duty.

I've just bought a house as a fixerupper to move in to. I did a 5% mortgage as I'm hoping the reno will add 50k to the value but I'm fixed until July 2021 and reno not yet complete so can't remortgage it yet.

My current property just made it through BTL criteria at 75% LTV so I can't do anything there. I did 4k cash transfer off a credit card. This was suppose to be repaid last month but having only really learned what her pension was making in the last few weeks she's reluctant to draw it down... Which leaves me with a higher than I'd like debt-income ratio. Hence my interest in her situation

Looks like she might just have to bite the bullet and take her lump sum.
Thought it was worth an ask.

Thank you all again
xx