Mortgage prisoners - too old, insufficient income ahhhhhhh

sallycath

Apologies, this may be a long post but we are getting desperate. History - self cert mortgage in 2006 for 13 years, ended 2 years ago, got an extension til Feb 22. Current mortgage company (Rosolite Mortgages) is an inactive lender and has sent us a letter saying we are mortgage prisoners. We owe 194k, house is worth around 300k. Current mortgage payment is a measly £184/month as its a tracker.  I am 51, husband is 66 retired and in poor health. We have four children (22,19,17,15) still living at home plus a boyfriend and No 1 daughter is pregnant. None likely to move out anytime soon due to lack of income/savings and house prices here (Cornwall) being high compared to income.  Joint income is around 38k which includes hubby’s pensions and PIP, child benefit and child tax credit. Been in touch with lots of brokers, no one has been able to help so far. Desperate to stay where we are as it’s a big 6 bed house, perfect for our family.  We’d be lucky to afford a 3 bed even with the equity we have which obviously wouldn’t be anywhere near big enough. Starting to get a little panicky. Main issues are obviously our ages restricting length of mortgage available and lack of income. Anyone any ideas, suggestions for brokers/mortgage companies that may be able to help? Anyone in a similar position with words of encouragement? 

pramsay13

Are any of the 4 + 1 children working?

Maybe they could be included on the mortgage.

MWT

Just ignoring age and earnings restrictions for the moment, have you worked out how much a month you could realistically afford to pay each month for a mortgage?

The concern is that if you've not been able to save even with payments as low as £184 then it is a problem, or have you been over-paying to reduce the outstanding mortgage perhaps? ... or you do have some savings built up to go with the roughly £106k equity?

tacpot12

I would suggest that you need to start overpaying the mortgage or saving hard. You don't have enough income to cover the mortgage you need, so you can't afford to stay where you are unless one of the young adults joins you on a new mortgage. If they can't do so, you are likely to be evicted eventually, so the more you overpay, the more equity you will have and the closer you will be to meeting lender's affordability requirements. You might be able to overpay and string out the eviction process for long enough that you will eventually be able to qualify for a mortgage, but hoping that this happens is not a great strategy, but it may be all you can do. 

It is time to have a discussion with the young adults to see whether anyone wants come in on the mortgage. I don't think any broker is going to be able to help you because you are so far away from being able to afford the mortgage you need. 

You could look at whether there are council houses you could rent. The fact you need six bedrooms and don't need means-tested benefits to pay the rent on a six bedroom property might mean there is a chance you might find a council property to rent.

Thrugelmir

sallycath said:

 Current mortgage payment is a measly £184/month as its a tracker.  

What steps have you taken yourselves to reduce the debt owed? However small overpayments will have been progressively starting to make inroads. Time to rally the family together. As your options are limited. Leaving it so late in the day. 

Mortgage prisoners are more generally those that can afford the repayments, but are trapped with high interest non active lenders. 

sallycath

@pramsay13 my eldest two are both furloughed at the moment as is the boyfriend, the other two are still at school. We have thought about one or more of them coming in on a mortgage but we’re worried about trapping them in it if they want to leave to get their own places. If they come in on a mortgage how easy is it to remove them?
@MWT we do have an idea of what we could afford. We’re now in the best financial position we’ve been in a very long time and could make overpayments.we have a small amount of savings built up in the last 6 months. 

@tacpot12 i doubt very much there’d be a council house we could rent, we actually only need 5 bedrooms (ideally), as they are in such short supply but it might be worth an ask. 

@Thrugelmir we’ve only recently come into the position of having some spare monies so haven’t overpaid as yet but it is an option, if only to put the mortgage company in a better mood when we reach the end. I wouldn’t have thought we qualified as mortgage prisoners either but we’ve had a letter from them that says we are, which a few brokers have wanted a copy of to prove. 

getmore4less

£194k,  £185pm is a rate of around 1.14%  say base + 1.04%

has this been interest only all along?

What was the original plan to repay the debt after 13 years? 

Base  rates in 2006  4.5%-5.0%  and peaked in 2007 at 5.5% so presumably your payments started out a lot higher
on £194k
5.54% £895
6.54% £1057
Look like you chased the payment down with rates dropping rather than eating into the debt keeping the payment the same.

lets go 2 years interest only and look at after the base rates dropped as they have been very low for the last 11 years
say your average rate was 1.5%
£194k over 111 and 13 years, debt left for various payments given most of that time the rate would have been under 1.5%
£157k £150k £500pm 
£121k £107k £750pm
£85k £64k £1000pm

Still would not have got you the place bought but would have eaten into the debt
In effect you have been renting the place for the last 14 years, 

£194k now £300k  seems a bit low for a price rise was this over 100% borrowing?
A quick look and £300k looks a bit low even  dodgy HMO are going for more

Even if they let you stay with them till you are say 70(19years) you need £1kpm for repayment on that low rate with a good chance it will go up.

Billy_B_North

I think that you need to be making plans in case you need to live out. It sounds as though you’ve chosen to spend everything that you earned rather than pay down your debt, and unfortunately now the party’s over, and there’s a bill to be paid.

You do not want to end up with a repossession. As well as the trauma you could well see the house sold at auction for much less than you’d achieve if you sold it yourself, leaving you with very little remaining after the mortgage and legal fees are taken.

Your daughter will hopefully be moving in with her partner, is he able to support her? Your nineteen year-old is an adult too, so may need to find their own place.

Some background as to what’s been happening to your money and your original repayment vehicle might help people to give the most appropriate advice.

big_saver_5

It is highly unlikely you will keep the house so you need to prepare to move
you have until feb 2022 so you may need to put the two older kids on notice that they will be moving into their own places next year and look to downsize to a 3 bed with the younger two
It is a shame that overpayments were not made earlier especially when the base rate dropped to enable you to have more equity and choice now however the reality is you don't earn enough for the property and mortgage you have and have been renting the property cheaply from the bank all this time. You will either need to downsize and buy for cash or you will need to sell and go into rented however this would mean spending your house equity on rent as you would be on too much to qualify for means tested benefits. Interest only always had an end date. What was your original plan? If it was to sell and downsize then I am afraid that is what you will need to do

davidmcn

tacpot12 said:

You could look at whether there are council houses you could rent. The fact you need six bedrooms and don't need means-tested benefits to pay the rent on a six bedroom property might mean there is a chance you might find a council property to rent.

Will the council agree that they "need" bedrooms for adult children? Or expect them to go get their own places?

sallycath

@getmore4less yes interest only all along and no plan at the time how to repay, a bit irresponsible I know. But at the time we had a good business and things were tickety boo. No, it wasn’t 100% borrowing and as far as the house value goes we’d be lucky to get 300k, more likely 280/85 in our area. 

@Billy_B_North and @big_saver_5 we are already making plans to sell, we just don’t want to. What I didn’t mention was that 3 years after moving in my husband underwent a triple heart bypass and has not been able to work as he did since due to deteriorating health, culminating in early retirement. There has never been any spare money to overpay, it’s all gone on day to day living, not frivolously spent (I wish).  As for our two eldest children getting their own places, that is extremely difficult here in Cornwall. My daughter and her boyfriend are making enquiries but it can take a long time to get a council house. My eldest son (22) would not be able to support himself and is not equipped to live on his own.