Lifetime interest only mortgage

mrsdrudge

We are aged 71 and 72 with a mortgage free semi detached Victorian house which we have lived in for just under 40 years.

Recently we have had to replace our car (20 year old citroen berlingo died on the motorway) and have had to replace our leaking foam sprayed roof. We still owe the builder £4000.

This has wiped out our savings and left us with the above debt which is the only money that we owe.

There are several other things in the house which need replacing (central heating , some double glazed windows are blown and one is cracked, stair carpet has been attacked by moth etc)

We also stupidly bought time share in the USA which is owned outright but has maintenance fees of around £2000 a year - evidently it will cost about £5000 to escape

We both have state pensions and husband has civil service pension of about £1200 a month and I have pensions of around £300 a month.

We are considering getting a lifetime interest only mortgage to make the house safe and comfortable for when we get older. We have looked at downsizing but the costs of moving would outweigh any equity in the house.

We have three children - two are buying their own homes and the third is still living at home with us.

Anything else we should consider?

ACG

Do you both have state pensions?

If you do, thats a household income of £43k. With no mortgage, you should be loaded.

A lifetime mortgage would do what you want, but with your incomes (assuming you do have state pensions) then I cant help but think something is missing.

mrsdrudge

Definitely comfortably off - first time in debt since we were whippersnappers. Yes, we could wait and save up for everything that would be nice to have - but we're not getting any younger and it would be good to get everything done while we are young enough to enjoy it. I'd like the heirs to get something when we die - but if one of us has to go into care then the house will only go to the council, won't it? Hopefully it won't come to that - we are both hale and hearty at the moment.

ACG

Personally, I think it would make more sense to bang it on a credit card or loan, it should be affordable with your incomes.

You say your home only goes to the council, true. But my gran went into a home. We visited 3 homes. One of them I told them that I would not trust them to look after a dog, let alone my gran - it STUNK and the residents were plonked infront of a TV - it felt like they were being neglected. Its score was adequate, which was worrying. (£650 a week back then to basically be fed and bed).

We then went to a home which cost about £800 a month - better, but its hard not to be. Still not really good enough for my gran.

Then we went to another which was £1,250 a week. Clean, no nasty smells or if there was it was dealt with. Decent food and they did things with the residents. Dont get me wrong it wasnt anything amazing, there was a trip to a garden centre once a month and then throwing a balloon around a room for some exercise twice a week. That was sort of the minimum I would have accepted for someone I love.

If you want to take your chances on council run, thats fine. But I would strongly suggest looking at what that actually means because honestly I would rather be put out of my misery.

Sorry, it turned quite dark this post didnt it! I was just really surprised at how bad it was. Its given me an incentive to earn what I can whilst I can because I honestly would not wish what I seen on someone I didnt like.

poseidon1

Having a live in adult child in the home will complicate applying for a retirement interest only mortgage or any equity release product for that matter - see article below

https://www.whatmortgage.co.uk/equity-release-2/advice-equity-release-2/my-family-live-at-home-will-i-still-be-able-to-release-equity/

Things could get very complicated ( and stressful) if one or other of you go into care and their income has to be redirected to cost of care and unavailable to meet mortgage interest.

Also what happens on death of one spouse leaving the surviving with insufficient income to service an interest only mortgage? What happens to the adult child if surviving spouse goes into long term care triggering a sale of the property under the terms of the mortgage?

Given these 'what ifs' probably best to look at straight equity release products with no obligation to pay annual interest, although those still don't address adult child situations where house sale triggered by going into care.

I see you are considering a program of house improvements. However prior to exploring equity release options also look at what you both could afford by way of unsecured personal bank loans over a 5 to 7 year period, from your income sources. There will be the same issues with regard to affordability in event of a death so might also wish to consider term insurance to cover that risk during the loan period.

Similarly, banks like Barclays can offer straightforward repayment mortgages up to age 80 (or sometimes beyond), which might also be worth a look. Taken out at age 66 mine redeems at age 80, but was offered to age 82. £55k borrowed, based entirely on single state pension although I did want twice as much.

Finally, a four floor victorian house sounds less than ideal as you get older, and potentially expensive to future proof if mobility becomes a problem. Think Stena lifts although fortunately your bathroom (unusually) already appears to be on ground floor. You should really reconsider possible down size options with no remedial works required in event of infirmity.

Depending on where your home is in the UK, Victorian homes still appeal to buyers even if requiring modernisation.

mrsdrudge

I know what you mean - though would be happy as long as I am left alone in a room and don't have to socialise! When my mother in law was taken into care (domestic violence at 94!!) she was initially put into a small home in a Victorian house which was more like a family home. She was moved into a spacious much larger and better equipped home which on paper should have been better but wasn't! Have no idea what the costs would have been as she was deemed at risk and had dementia so didn't have to pay. No idea if they will try and recoup the costs from her violent and controlling husband but I do hope so. We didn't have financial power of attorney - he and his daughter did and gave her no money from when she was in the care home. This was her third husband - so no blood relative praise be.

gwynlas

Because of mortgage minimum loan amounts I would think that you are unlikely to qualify.

I think you should cost up what you believe you would like to get done central heating,.double glazing units, replacement stair carpet and £4000 for builder all possible I would think for about £20.000 and take out a loan to get it all completed asap

mrsdrudge

https://forums.moneysavingexpert.com/discussion/comment/82100714#Comment_82100714

Adult child is 40 - back home folllowing failed relationship so hopefully temporary … he is perfectly able to find other accommodation should it prove necessary.

Will look at bank loans but this is where the death of my husband would severely reduce my income - so am a little concerned being left with a large monthly payment. I hadn't thought of insurance, so thanks for that advice.

As to downsizing, we could, if the worse comes to the worse - live on the ground floor - this is where the kitchen, bathroom a reasonable size room which could be used as a bedsitting room and a sun room/conservatory is. There is a side entrance with only five steps up to the front ground level.

We have looked at moving but would like to remain in the South East near family and friends, and unfortunately live in one of the few towns in Kent where house prices have remained static. The cost of moving outweighs any equity. The stairs keep us fit!

MWT

I'll type more later, but in short for now, a Lifetime Mortgage product doesn't need to have a required repayment at all, but optional repayments are possible if you want to stop the interest from rolling-up.

An adult child in the property is not an issue and can be resolved with a standard occupancy waiver.

Similarly if the mortgage is structured as a drawdown facility rather than a simple lump sum that can avoid issues later on with excess capital, or for that matter avoid drawing down more than is actually needed at any point in time.

All of this needs proper professional advice though and that will have a cost, but you cannot access this type of product without it.

I'd also 2nd the comments from ACG re wanting to remain in control of selecting suitable facilities if there is a need for care later on.

With both my father-in-law and now mother-in-law needing those services it was an eye-opening process to review the choices. Fortunately both had more than sufficient capital but I'd hate to depend on the council for this.

itsthelittlethings

https://forums.moneysavingexpert.com/discussion/comment/82100505#Comment_82100505

I cannot for the life of me work out where you're getting 43k a year from?

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/82101010#Comment_82101010

The OP said they had £1500 pm month in other pensions.