Lifetime interest only mortgage

Keep_pedalling

Do the timeshare sharks have you in a perpetuity clause?

silvercar

paying £5,000 to escape a £2k annual maintenance charge on the time share, may be a reasonable plan.

whizzywoo

One thing you need to consider is that Lifetime Mortgages, Equity Release won't consider a house which is not in good repair.

Our house wasn't and so we sold it, moved in with family and looked for a new build and took out a lifetime mortgage on that. But they still were incredibly picky about everything.

Go and see a broker who specialises in these kind of mortgages. Make sure you see one that is independant.

With ours we had a choice of paying the interest in full but nothing off the capital, paying the interest and reducing the capital as well each month, or paying nothing at all and letting the compound interest machine do it's damage. We pay the interest in full each month and another amount to reduce the capital slightly. If and when we possibly come into an inheritance we will pay it off in full.

Keep_pedalling

https://forums.moneysavingexpert.com/discussion/comment/82101351#Comment_82101351

Unless the £5k is paid up front to a dodgy 3rd party.

ACG

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

State pension is £12,500 pa x 2 (2 people) is £25k.

£1,200 pm in private pension £14,400.

£300 pm in private pension is £3,600.

£25k + £14.4k + £3.6k = £43k.

ACG

I think a lifetime mortgage in this situation is crazy.

You can afford to take on the debt to do the work you want.

A lifetime mortgage if you do not repay it will go up and up faster and faster due to the effects of compounding.

The risks being:

1. You choice of later life care will be greatly diminished if you go down this route.
2. Your kids will get nothing (or less) as a 40 year old, in all honesty I dont care if I inherit nothing from my parents. If all of their money goes on care or cruises, I really would not mind. My grans savings was going at a rate of £1500 a week, but when I went to see her she was clean, fed, had her hair done etc and lived in a place that was clean and did not smell - money well spent even if it did dip into my inheritance.

I feel like I am letting my personal opinion come into this. But I firmly believe from what has been said this should be easily affordable and so makes more sense to do it with a loan. But I can understand your preference of not wanting to repay monthly.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82101862#Comment_82101862

Worth reiterating each spouses ongoing ability to afford loan repayments severely compromised if one of them dies during loan term.

Hence, cost of joint life first death term insurance should be factored into their budgeting if going down conventional lending route rather than equity release. I would not consider life insurance as merely optional in this situation.

ACG

https://forums.moneysavingexpert.com/discussion/comment/82101895#Comment_82101895

Maybe but at that point you could then look to go down the route of a lifetime mortgage. At least at that point the debt has come down, the amount of time it has spent rolling up would be less and if care is needed, it is only for one person.

I think the cost of that would likely be better spent on the loan itself but I suppose it would be a conversation.

poseidon1

So as to not discourage OP looking at term insurance, typical cost of £50k joint life 1st death over 10 year term for couple in OPs age range, could be in the £40 to £55 per month range assuming both parties in good health.

Likely cost would be cheaper if its Joint Life decreasing term policy, covering a conventional repayment mortgage.

Certainly worth making these part of the overall finance protection conversations.

MWT

https://forums.moneysavingexpert.com/discussion/comment/82101862#Comment_82101862

I think a lifetime mortgage in this situation is crazy.

I don't often find myself taking a different view to yours, but in this case perhaps age lends a slightly different perspective…

Right now I suspect that the £43k really doesn't feel like it is plenty if they are still trying to travel and enjoy life, so taking on debt that they might not clear until they are too old to enjoy some things they currently still want to do really doesn't make too much sense.

A Lifetime mortgage product can be very flexible in the hands of someone able to manage their finances.

The kids are unlikely to be left with nothing and certainly not less than that as these products cannot result in a debt beyond the property value these days.

Yes, the interest rates can be higher than a standard mortgage, but it is easy to arrange a product which has no obligation to pay each month yet still allows payments to be made if they wish.

So with the right product they could repay the interest in full, or even make further payments up to an amount typically equal to around 10% of the amount borrowed.

They can also arrange it as a drawdown facility so they do not start incurring any interest until they make a withdrawal to cover one or more of these immediate and short term needs.

So with proper product choices and management they will have both the flexibility to get the cash when needed and still stop the interest from rolling up and even pay down the capital to preserve the majority of their equity for future needs…