Interest Only Mortgage Deal-Advice

lunagirl_2

Looking for some advice before I speak with an advisor. I will summarise the main points of this story which is causing me stress trying to work out what the best option for mum is. 
2009 my mum goes through a messy divorce and due to being left with a load of martial debt she was unaware of she has to buy a new property on an interest only deal. 
2020 and my mum has finally cleared the debt and we start looking at her mortgage. We have always been aware IO is horrific but I was young when my Mum entered into this and I don't think she had much option. 
House has approx 30k equity. Current mortgage stands at 83K and is with the Halifax due to end in 2026. My mum retires (hopefully) in 2027 with a modest pension. She will get a lump sum but unsure of exact amount. She is single and has not remarried. 
Ideally I would purchase the house but second home fees combined with my young family make that impossible. So trying to work out what our options are?? 
Does anyone have any advice? Other than head in the sand for the next 6 years and hope for the best!!

Thanks.

lunagirl_2

Also should add, house is a 2 bed semi. Could downsize to a flat but not sure would get anything suitable in the area for any less. 

Sistergold

I am sorry to hear that your mom is in this tough position in which many single woman find themselves in. Since she has paid off the debt she should now look at bringing down the mortgage as much as possible for the next 6 years through overpayments. If I were her I will want to overpay by earning extra income any way I can. One way to create more overpayments will be to get a lodger and or work weekends/get another job. I know most people want to stay by themselves but desperate times and all. At one point I rented in house where the owner lived in the lounge. Even if the extra payments did not pay off the mortgage by the end of the term it will mean more equity for her so it’s still not bad. The overpayments might also mean she can pay off balance with part of her pension as the balance will have been much reduced also at that point the figure might be such that as family you can help as balance might be manageable? 

I know there are some banks which offer a mortgage well over 70years with this maybe she can change it to a repayment mortgage? 

I am planning on getting a lodger myself so as to pay off my mortgage quicker as I am also a single parent. I will not mind going to the extent of sleeping in one bedroom with my children so as to accommodate a lodger if this was the only way I can pay my mortgage. 

Xx

lunagirl_2

Hi there
Thanks for that and defo some consideration. Think before i look at those avenues though I would be useful to know what type of repayment my mum would be offered at her age and if its worth going onto a repayment now or overpaying for 6 years then moving onto a repayment. Obv with limited working years left I'm not sure what the possibility of that will be. 

Thrugelmir

Does your mother reach State Retirement Age in 7 years? 

Could you afford to lend your mother some money? Even just on a monthly basis. 

lunagirl_2

Yes she reaches 65 in 7 years. 
I could lend her money but I was wanting to know if anyone else had any experience of interest only deals ending and what alternatives were available? 

zagubov

You're right that this might be a case for a mortgage broker.  We were on an interest-only mortgage with FD but were overpaying it to make it as close to a repayment mortgage as we could get.  With 8 years left we re-mortgaged for a repayment mortgage which will save us more than £30k by the time we end.

Everybody says it's easy to remortgage with the same company (they reckon it's just asking for a "retention product") but in this case, it was like pulling teeth, although at the end, they did us right.

getmore4less

£83k on a £113k property LTV 74%
Should be able to get <2% rate.
Start with what she can afford?
age term payment on £83k 2%
63 5y £1,450
64 6y £1,225
65 7y £1.060
66 8 £940
67 9y £840
6810y £765
69 11y £700
70 12y £650
If none of those work then it raise more income or find the capital to reduce the debt.
if you do support the income you can do it as a loan to protect your money from asset grabs(like care fees).
if future retirement income is going to be low then another option can be sell up and rent as this opens up things like pension credits and other benefits that cover council tax rent etc.

[Deleted User]

Your mum is only 58 and has a modest mortgage and mortgages can be extended to end at age 70/75 now. It would be easy ( if she earns enough to be loaned £83k ) to remortgage to a repayment mortgage and also as and when make overpayments. Changing the mortgage now would be best as this forces the repayments to start. 

Sky_

lunagirl_2 said:

Hi there
Thanks for that and defo some consideration. Think before i look at those avenues though I would be useful to know what type of repayment my mum would be offered at her age and if its worth going onto a repayment now or overpaying for 6 years then moving onto a repayment. Obv with limited working years left I'm not sure what the possibility of that will be. 

What is the current IO interest rate on the mortgage and is it a fixed rate or similar?  If it's very low and/or has high early repayment penalties, it might be worth sticking with the current deal and overpaying for now.

Petriix

There are lots of later life mortgage options now. My Dad took out a 15 year repayment mortgage at age 70. Depending on the current interest rate on the interest only mortgage she would probably benefit by switching to a repayment mortgage ASAP. It's just down to whether she can meet the affordability criteria.

In any case, she should be overpaying as much as possible now so as to reduce the overall interest that she pays. What is the current interest rate on her mortgage?