Pensioner's interest only mortgage term ending with outstanding balance

helpjack

Hi all,

Looking for some advice on how to help my MIL. She and her partner have an interest only mortgage. It has an outstanding balance of approx £19k and ends this year. 

My MIL is a pensioner and only has her state pension as income. Partner has no income but house deposit came from his inheritance so mortgage in joint names. She has been paying down the balance in recent years and also receives SMI. She has a small amount of savings. Not enough to pay it off but we estimate she could pay it off with an extra 3 years.

She says she has spoken to Halifax and they've said they won't extend the term and have sent a letter threatening repossession if the balance isn't paid at the end of the term.

I'm going to try and speak to them tomorrow and understand exactly what the situation is. 

My MIL is useless with paperwork or admin so I help with most things like this. 

Halifax have suggested a lifetime mortgage and the mortgage advisor at the local branch gave them a number to call. The man she spoke to said he couldn't proceed without £1800 for a valuation. This seems exploitative to say the least. I also wonder whether they would get a lifetime mortgage when the DWP already has a charge against the property for the SMI.

Would they really repossess a pensioner when she is so close to paying it off and has a plan to do so.

The other option is for us to help financially. We could either pay it off and try and also put a charge on the property to secure the money or somehow take over the mortgage but this would be the last resort. 

Any advice/ knowledge would be gratefully received.

Brie

Imagine the picture on the front of the local news paper of your MiL & partner looking sad, standing beside a pile of furniture outside their home, with a fat banker throwing the cat out the front door.  Headline - Bank kicks out Pensioners (& cat).  Just the sort of publicity banks do NOT want.  

So no, frankly I don't think the bank would repossess the house.  And I think that MiL has called the general mortgage number and got through to some person who has had 3 weeks training and is quoting from the their process guide rather than actually thinking about a problem and what might really help.

I do think that if you can get hold of their vulnerable customer team they might manage to come up with a solution.  

helpjack

Thanks I'll ask to speak to them tomorrow. This is what doesn't make sense to me. Surely, it would be much simpler for Halifax to continue as they are and get it paid off in three years than go through a repossession.

Isthisforreal99

I wouldn't be so confident as Brie. Your MIL knew this day would come and no plans to repay the mortgage. How much is the property worth?

helpjack

They didn't start off with an interest only mortgage. It was repayment but partner lost his job so Halifax put them on interest only. Eventually they qualified for SMI and MIL has been making repayments from her pension. So, yes, MIL did know this day would come and did have plans to repay she just couldn't make up the gap by the end of the term. 

jaybeetoo

Have you got Power Of Attorney (PoA) for your MIL?  If not, the bank will probably not discuss it with you.  If she doesn’t have a PoA set up, I recommend she does get one asap for finance and health.

helpjack

They are going to give permission for me to talk on their behalf. We will be together tomorrow. I have spoken to Halifax before over the phone with their permission. 

ACG

Chances are an equity release/lifetime mortgage would need to raise enough for SMI + £19k. 

I dont think the bank would ever win in court, £19k and overpaying to the tune of £6k(ish) a year, I cant imagine any judge is going to kick a pensioner out of their home for that. By the time you went through the complaints process with the bank and the FCA (who would ask halifax to put a hold on the repossession anyway) and dont forget the mortgage charter which I think gives people 6 or 12 months from going into arrears... The balance would likely be around £10k by the time it got to court. 

I think Halifax are just playing the tough guy at the minute as its not uncommon for people to try it on. With a bit of pressure applied you would be surprised at how many people find an answer - I used to hear everything from partners taking out the mortgage fraudulantly (when we suggested taking them to court they would backtrack). 

MWT

ACG said:

Chances are an equity release/lifetime mortgage would need to raise enough for SMI + £19k. 

That is my understanding as well, both would have to be cleared at the same time as the Equity Release was taken.

Should be some cheaper routes to get it than '£1800 for a valuation' ...

There will be costs involved for the advice but that can usually come out of the amount released, I certainly wouldn't proceed with anyone asking for that sort of money up front. 

The other thing to keep in mind is that while they are unlikely to succeed with a repossession, there can be legal costs added to the loan and of course a higher interest rate once they are in default at the end of the term, so it may still be in their best interest to figure out a way to resolve this sooner rather than later.

Isthisforreal99

If it were my parents I'd take the stress off them and take out a loan to pay it off.

helpjack

Yes, but its not my parents and £19k is a huge amount to take out as a loan.