Help parents of pension age with house/mortgage they can't afford - what options can we consider?

ERPY85

Hi everyone,

I hope this is the right forum to post this in. In short my parents find themselves of Pension Age, and with more outgoing than incoming. They have around £54k left on their mortgage, the house is worth around £260k (very approximate). 

Me and my sister both rent, and are both trying to save for a deposit to buy our own homes (we are both looking at 2-3 years at least before this is a possibility). 

My parents are considering all sorts of options which seem scary to me, like equity release (although they've actually been told they are too young for this and it would be a mistake right now!). But they are getting desperate.

Does anyone have any suggestions, however 'out there' they might be, on how we could potentially invest in our parents property, to help them, and end up effectively 'saving' like we are now for our own homes? 

We were wondering about options like becoming co-owners and paying off their mortgage then somehow releasing this investment in a few years? 

We are all very unfamiliar with home ownership, mortgages etc. But it just seems crazy to us we are trying to save to buy somewhere, whilst our parents struggle and may (effectively) lose their home, or the value of their home, through equity release. 

Any advice, suggestions or thoughts (however realistic/critical) would be appreciated. Thank you!

Keep_pedalling

They won’t be too young for ER if they have reached state pension age.

Presumably this is the family home so downsizing might be the sensible option if you have moved out. They should also take a good look at their expenditure to see where they can cut down.

Becoming co owners would be a mistake, you will lose your first time buyer status and will be paying a lot more stamp duty when you do buy your own place. It will also be very difficult to get your equity out when you need it.

Sea_Shell

Before doing anything drastic, have you been able to help them budget for what income they do have, and possibly reduce spending?

Are they still working, even if of "pension" age?

Do you have enough information to post up a Statement of Affairs, even if only rough at this stage?

JGB1955

Could they take in a lodger?

gwynlas

How old are they? What is the end date of their mortgage? How large is the house? Would they consider downsizing into a one or two bed property? What is their pension income and are they receiving all the benefits they are entitled to? Are they joint tenants or tenants in common? Have they made wills? Answers to all would help with suitable replies rather  than drip feeding information.

MWT

ERPY85 said:

We are all very unfamiliar with home ownership, mortgages etc. But it just seems crazy to us we are trying to save to buy somewhere, whilst our parents struggle and may (effectively) lose their home, or the value of their home, through equity release.

Too many myths and old horror stories still circulating around equity release...

Equity release doesn't mean they will 'effectively' lose their home, nor does it necessarily mean they have to lose the value either, that all depends on their specific circumstances...

£54k should be easily achievable using ER as long as the property itself qualifies, and if they can afford to keep paying the interest on the ER amount then it would stay exactly where they are now with owning all but £54k of the property value.

If they can afford to slowly pay back above the interest then that £54k could be further reduced over time.

The important thing from their perspective is that it takes the pressure off them having to make a payment each month, especially if their circumstances change over time.

I would suggest they talk to StepChange Financial Solutions, to get an idea of what is possible, they offer ER advice with no fee...

If they are still earning and can justify continuing to earn into retirement there are other products like Retirement Interest Only (RIO) mortgages, or even standard repayment mortgages, but their suitability depends very much upon their ages and their guaranteed income into retirement. 

ERPY85

Thanks everyone, things there I hadn't really considered about first time buyer status etc. Unfortunately my parents haven't really disclosed any specific details about their finances so I couldn't put up a SOA or anything like that, understandably they don't want to tell their children the specifics. We are just very aware of the stress they are obviously under. This query was more us just thinking out loud, to see if there was anything we hadn't considered. 

MWT I didn't realise Stepchange did this type of advice regarding equity release. They had a meeting with a 'financial advisor' who told them it wasn't feasible for them, but I am not certain exactly where he came from!  I will recommend they speak to Stepchange and get some further advice. I'm sure there must be a solution for them, I hate seeing them struggling. 

fergie_

I think you will need some professional advice here.

There are so many variables - what is good for your parents might not be good for you. What happens if the family falls out? Could someone be left with an unexpected tax bill? What are their long term plans?

MWT

ERPY85 said:

MWT I didn't realise Stepchange did this type of advice regarding equity release. They had a meeting with a 'financial advisor' who told them it wasn't feasible for them, but I am not certain exactly where he came from!

There are two sides to StepChange, one is the traditional debt advice that everyone knows about the other side is their mortgage arm, StepChange Financial Solutions. It is free advice from them so no harm in at least having a conversation, it is possible that there is something the other financial advisor saw in the details that could be a problem, but still worth at least talking to them for a second opinion...

kelbel18

Could they downsize and get rid of the mortgage? How long is left on the mortgage?

elsien

Sell and buy somewhere cheaper was my first thought as well.

Why has the mortgage suddenly become unaffordable? It seems to me that in order to help them they have to be clearer about how they’ve got into the situation that they have. Because if it’s down to overspending on other things, that’s probably not going to stop without a bit of a reality check. Whereas if they are living very frugally and a mortgage rate increase has tipped them over the edge, that’s a different scenario and different answers.

 Have they considered returning to work to bring more money in on top of the pension, even if it’s just part time? Parent carried on working  (from choice) well into her 70s.