Interest only mortgage options

helenajosephine

Yesterday, my parents dropped the bombshell that their interest only mortgage is due for full repayment in 2023 and they don't have the £33k capital to repay it. 
I've being going through the options in my head (all night) and am struggling to know how best to help them. 
As with other suggestions here, they could sell, but a) I think the stress of the move would kill my Dad who is in really poor health and b) any suitable property options are quite a way above what their house is worth. 
So, I could take out a loan for the £33k and pay it off for them, but I am concerned about losing that if the property is eventually needed to pay for either my Mum or Dad's long term care (they are 79 and 83yrs old respectively). 
I've suggested that they talk to the original lender and see what options they have to offer, but it would be good to know if there is anything I can do if the lender insists on the full repayment. 
... and I know people will ask how my parents had thought they were going to repay the money when they took out the mortgage? They didn't because I genuinely think they didn't expect to still be alive 20years on

MWT

Equity release could be a solution, could you tell us how much you think the house is worth, and is it generally in a good state of repair?

Also the type of property, i.e. is it a flat, a terrace etc. and is it close to commercial or industrial premises?

helenajosephine

The house is worth around £165,000. It's a terrace property in a cul-de-sac. Not close to any industrial or commercial premises. It's in good repair afaik. It would be good if they could release only the equity to pay off the £33k.

MWT

helenajosephine said:

The house is worth around £165,000. It's a terrace property in a cul-de-sac. Not close to any industrial or commercial premises. It's in good repair afaik. It would be good if they could release only the equity to pay off the £33k.

Based on that information they should easily have options that would release only what is needed to pay off the mortgage and would let them continue to pay the interest each year if they wanted, or to let it roll up if not.

I'd suggest they talk to Step Change Financial Solutions who will not charge for their advice.

https://www.stepchange.org/how-we-help/mortgage-equity-release.aspx

Taking advice is mandatory for equity release products and many advisors will charge from a few hundred to a few thousand pounds so if they do decide to go elsewhere be very clear on what the charges will be for the advice...

Also check if there are any early repayment charges on the existing mortgage as it would let them deal with this worrying problem right now if they could take the release and pay off the mortgage now rather than waiting. (you can't take equity release without clearing any existing mortgage at the same time).

helenajosephine

That's really helpful advice. Thank you so much for responding to my question 

getmore4less

if you can afford to support them  raising the capital, you can structure it a loan to avoid it disappearing on a sale.

What  are their finances like?

if you have property with plenty of equity you borrowing could be the cheapest option
Any other relative that could chip in to share the load

MovingForwards

If you can access the money, by way of savings or remortgaging your own home, to pay the outstanding mortgage and associated fees then ask the solicitor to secure a private mortgage on their property. It works like a normal mortgage only you set the terms eg repayment on death of one or both, or when the second goes into a carehome.

Your money is safe as you're paid back and as it's a secured load on the property everything above that figure is available for their use if needed.

No additional SDLT as you don't own any of the property.

helenajosephine

MovingForwards said:

If you can access the money, by way of savings or remortgaging your own home, to pay the outstanding mortgage and associated fees then ask the solicitor to secure a private mortgage on their property. It works like a normal mortgage only you set the terms eg repayment on death of one or both, or when the second goes into a carehome.

Your money is safe as you're paid back and as it's a secured load on the property everything above that figure is available for their use if needed.

No additional SDLT as you don't own any of the property.

Thank you for your advice. My parents have a meeting booked with a mortgage broker through StepChange, and hopefully there will be something they can do to help. If not and it does require my and my brother paying off the capital, then its good to know we can secure a return of our loan to them.