Parents paying over 4%...

Flatulentoldgoat

My parents have a mortgage of about £150k on a second home 'buy to let'. I've been doing some digging and diving and I think they've really been screwed over by Virgin Money really badly for some time, like 5+ years. They're both in the 70-75 bracket and retired what options would they have? I'm not a fan of equity release on their first home if it can be helped. Their main house has been on interest only for the past 20 years so any money tied up in it is appreciation only .

Appalling situation, they're not very money minded and I refuse to prop them up if they're allowing themselves to be ripped off negligently.

MovingForwards

Buy to let is always higher interest rate. They could always sell the property.

How long is left on the main home mortgage and what was the plan to pay that off?

Thrugelmir

What's their current mortgage product. Any early redemption charges? Consult a broker for alternative options. 

Is letting the property profitable? If not consider disposing of. 

Flatulentoldgoat

Here's where things get strange. Their main house was originally their primary home, the second place which is a small flat was going to be for seasonal lets and a bolt out hole. My dad lost his job and as a result they decided to let the primary home and move into the small flat.

The primary house has been let for 4 years but the tenants have lost their jobs and are moving out. So with money being tight all round the expensive mortgage issue has come to the fore.

I think there's 4-5 years left on the interest only mortgage on their primary house. When that expires I might take it off them or it'll be sold...

Thanks

dunstonh

 I think they've really been screwed over by Virgin Money really badly for some time, like 5+ years. 

There is no screwing over here.

Appalling situation, they're not very money minded and I refuse to prop them up if they're allowing themselves to be ripped off negligently.

They are not being ripped off.  It is not appalling either.      Screwing over, ripped off, appalling....You  are going a bit over the top. 

 Their main house was originally their primary home, the second place which is a small flat was going to be for seasonal lets and a bolt out hole. My dad lost his job and as a result they decided to let the primary home and move into the small flat.

Which is probably the root of the issue.  They are using a residential mortgage with consent to let which probably has an interest rate surcharge to reflect the increased risk.  Typically lenders charge an extra 0.5-1.0% for this.

I think there's 4-5 years left on the interest only mortgage on their primary house. When that expires I might take it off them or it'll be sold...

How does it cost out if they were to look to put it up for sale now (or post lockdown)?   

Flatulentoldgoat

dunstonh said:

 I think they've really been screwed over by Virgin Money really badly for some time, like 5+ years. 

There is no screwing over here.

Appalling situation, they're not very money minded and I refuse to prop them up if they're allowing themselves to be ripped off negligently.

They are not being ripped off.  It is not appalling either.      Screwing over, ripped off, appalling....You  are going a bit over the top. 

 Their main house was originally their primary home, the second place which is a small flat was going to be for seasonal lets and a bolt out hole. My dad lost his job and as a result they decided to let the primary home and move into the small flat.

Which is probably the root of the issue.  They are using a residential mortgage with consent to let which probably has an interest rate surcharge to reflect the increased risk.  Typically lenders charge an extra 0.5-1.0% for this.

I think there's 4-5 years left on the interest only mortgage on their primary house. When that expires I might take it off them or it'll be sold...

How does it cost out if they were to look to put it up for sale now (or post lockdown)?   

I think it works out at about 300-350k. But I really want to refrain from letting them sell. Could they potentially sell either property to me at a discount? That's another avenue that I'm exploring. I have a help to buy isa and did have a mortgage approved at about 1.4% (although that sale didn't go through)

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Thrugelmir

Has the rental income been disclosed to the HMRC? 

Flatulentoldgoat

Thrugelmir said:

Has the rental income been disclosed to the HMRC? 

Not sure, can you elaborate?

Caz3121

Flatulentoldgoat said:

Could they potentially sell either property to me at a discount? That's another avenue that I'm exploring. 

have a read up on deprivation of capital. If they require means tested benefits or care in the future they could be treated as having the "discount" amount as notional capital
What was their original repayment plan for the interest only mortgage?

societys_child

"I refuse to prop them up if they're allowing themselves to be ripped off negligently"

That’s the spirit . .

. . and you think it will help them out by buying one of their properties at a discount?

Thrugelmir

Flatulentoldgoat said:

Thrugelmir said:

Has the rental income been disclosed to the HMRC? 

Not sure, can you elaborate?

Rental income after deduction of allowable costs is subject to income tax (as applicable to personal circumstances).