Helping Dad to retire

hamel123

Hi, new here, hoping someone can help. In a nutshell: my Dad is 69 and wants to retire. He has £126k on his mortgage with RBS. His flat is worth approximately £265k. He has no savings and only gets a state pension.  We're looking into lifetime mortgages. However my brother and I were also thinking about switching titles deeds to our name and take on mortgage. Has anyone had experience of this and if so, any watch outs? We're both married and have kids and have mortgages against our own homes. So this would technically be a second home. 

MWT

The issue with a lifetime mortgage is that he would have to be able to clear the current mortgage and at age 69 with a valuation of around £265k he is going to struggle to get more than about £110k out of the property, so on its own it wouldn't clear the current mortgage.

I would certainly suggest talking to a good broker about the options to take on the current mortgage, but even if it is the two of you on the mortgage rather than your father, he still isn't going to be able to benefit from the equity in the house while there is a mortgage on it...

MalMonroe

How long does the mortgage still have left to run? 

Is there a reason your dad needs to retire now - he'll struggle with that size of mortgage, no savings and only a state pension.  

I agree with MWT about talking to a good broker. And I'd be careful about taking on responsibility for your dad's property with your brother - with the very best of intentions, sometimes this kind of arrangement can go sour. 

hamel123

He has 6 months left before current mortgage comes to term. By which point he will be 70. Therefore very few lenders willing to borrow. Especially with only state pension.

My concerns with my brother and I taking mortgage on are: a) it will impact our borrowing capacity going forward b) if either of can no longer make payments, it will cause all sorts of issues..

MWT

hamel123 said:

He has 6 months left before current mortgage comes to term. By which point he will be 70. Therefore very few lenders willing to borrow. Especially with only state pension.

Was this an interest only mortgage, with no plans on how to pay it off at the end...?

csgohan4

Downsize would be an option

davidmcn

csgohan4 said:

Downsize would be an option

Would seem the only sensible option if what the OP is saying is that nobody can actually afford to take on a mortgage.

Browntoa

Another vote for downsizing .

Possibly look at sheltered housing association like Anchor , my mum pays £500 a month all inclusive apart from electricity. She sold her bungalow and is living off the capital . 

At his age cash gifts from the capital are possible , no tax implications if he lives for 7 years . If it's not excessive it shouldn't be classified as "deprivation of assets " for care purposes

csgohan4

Sadly investing for your retirement is something that some people underestimate. I remember one thread on the savings and Investment section who didn't want to invest in pensions as they felt they wouldn't live that long. 

I think for future readers, relying on state pension is not going to make your retirement very enjoyable. Can you live on peanuts?

Invest in pensions now, it reduces your tax bill if you earn enough and safeguards your future. 

hamel123

Thanks everyone. Very useful. We've considered downsizing. Hes in a 1 bed flat so not sure how much further we can go. London (Harrow) prices! Completely agree with csgohan4. Having spent the last month trying to sort this, it's abundantly clear that if you still have a mortgage and no proper pension at a later age - options are aweful. Future financial planning is essential. Seems obvious to say but not enough people take it seriously. 

fred246

I'd be interested to know if you sell your house and rent a nice apartment. When you're 90 and infirm and penniless would benefits eg housing benefit pay? The social security system doesn't normally kick the elderly out on the street.