How does a lifetime mortgage work please ?

littleivy

I am looking for ways to be financially better off , at the moment we are with Mars Capital who bought our mortgage from Kensington. I had cancer in 2022 and got into arrears with the mortgage as no income , hubby's business had to close as covid affected it badly . 
So now we are in this situation , we owe £102400 on the interest only mortgage , and while without income we now have a mortgage of £117000, the house is worth around £145-179k.
We looked at remortgaging as now we have benefits which are a total £1770 a month , we have just started paying full contractual interest only payment , and Mars Capital will look at capitalising the arrears of £15000 in six months time . 
We have 12 years left on the mortgage from October this year , we looked at putting it back on repayment but that would be impossible as the interest rate is 8.45% it varies each month , we got the mortgage 17 years ago while self employed so we were considered high risk so paid more and still paying more , we switched to interest only because of a decline in business .
Wondering what options we have , I have signed up with the local housing as was advised by the council should we be made homeless . 
Trying everything possible to improve our situation and would appreciate any suggestions , thank you 

MWT

littleivy said:

So now we are in this situation , we owe £102400 on the interest only mortgage , and while without income we now have a mortgage of £117000, the house is worth around £145-179k.
We looked at remortgaging as now we have benefits which are a total £1770 a month , we have just started paying full contractual interest only payment , and Mars Capital will look at capitalising the arrears of £15000 in six months time . 

There are several different types of 'Lifetime Mortgage' but they all share the need for them to be the only mortgage on the property, so your existing mortgage would have to be cleared when the new mortgage was taken out and it is difficult to see how you are going be able to do that if the outstanding balance remains around £117k on a property value that is at best £179k...

You don't mention your ages, but the age of the youngest person on the mortgage will determine which options you may have, with most of them becoming available when that age is at least 55.

Unfortunately you will not be able to get anything even remotely close to covering your existing £117k mortgage using equity release and rolled-up interest on a Lifetime Mortgage.

You do not mention your pensions, but unless you have a significant private pension which will guarantee sufficient income for each of you (tested individually) to cover the ongoing interest payments on a Retirement Interest-Only (RIO) mortgage, that is not likely to be an option either. 

Do talk to a broker though, because with full details from you they may be able to come up with a normal mortgage alternative, but probably not a 'Lifetime Mortgage'...  

Do also consider selling and looking for a smaller property, but I appreciate that options may be limited, especially if the sale is at the lower end of your estimated value...

littleivy

MWT said:

littleivy said:

So now we are in this situation , we owe £102400 on the interest only mortgage , and while without income we now have a mortgage of £117000, the house is worth around £145-179k.
We looked at remortgaging as now we have benefits which are a total £1770 a month , we have just started paying full contractual interest only payment , and Mars Capital will look at capitalising the arrears of £15000 in six months time . 

There are several different types of 'Lifetime Mortgage' but they all share the need for them to be the only mortgage on the property, so your existing mortgage would have to be cleared when the new mortgage was taken out and it is difficult to see how you are going be able to do that if the outstanding balance remains around £117k on a property value that is at best £179k...

You don't mention your ages, but the age of the youngest person on the mortgage will determine which options you may have, with most of them becoming available when that age is at least 55.

Unfortunately you will not be able to get anything even remotely close to covering your existing £117k mortgage using equity release and rolled-up interest on a Lifetime Mortgage.

You do not mention your pensions, but unless you have a significant private pension which will guarantee sufficient income for each of you (tested individually) to cover the ongoing interest payments on a Retirement Interest-Only (RIO) mortgage, that is not likely to be an option either. 

Do talk to a broker though, because with full details from you they may be able to come up with a normal mortgage alternative, but probably not a 'Lifetime Mortgage'...  

Do also consider selling and looking for a smaller property, but I appreciate that options may be limited, especially if the sale is at the lower end of your estimated value...

Hi, thank you for your reply , I am 60 in September hubby 61 soon . I think the only option will be to sell and downsize . Thank you again .