Equity releae /'lifetime mortgage'

Old-Woman_4

I took one of these out about 3 1/2 years ago, from Northern Rock< when I was 62.

The amount was £27,750, which I needed for improvements to my bungalow (then mortgage-free) and a car upgrade.

basically - the deal was, that I pay nothing back, and the amount increases at 6.69% - the whole amount being paid back when the house is sold. (When I die, sell up, or go into care.)
Northern Rock guarantees that whatever happens, my dependents would not have to meet any shortfall if the amount owed exceeds the value of the property.

I got the statement in January, and was horrified to find that the total has now risen to just under £35,000.

I knew the interest was conpounded, but had simply not understood that it was compounded MONTHLY, not YEARLY.

All I have as savings is £7000, but REALLY want to clear this debt - has anyone any ideas/

I'm on a fixed income of £1300 per month, and my credit is very good - this is the only thing I owe.

angelavdavis

You will need to dig out the paperwork to understand what the terms are for the deal and whether you have the option of buying yourself out of the scheme or at least what penalties you are likely to pay if required.

It is then down to whether you can obtain credit from other organisations. Have you enquired whether you are able to borrow from another lender?

Old-Woman_4

I'm still waiting for N Rock to come back to me if they have a solution.
At present they said I would have to pay £192 pm to keep it down to the capital - that is a little too much for me - I reckon I could afford about £150 comfortably.
After I hear what they say - I'll cast about for other solutions - I think I was mis-sold in the first place - went to an IFA but he didn't really explain things properly - left it to the solicitor, who had about as much idea as me!

Old-Woman_4

And I would think my age (66) and the fact that I'm on a fixed income would be a problem?

margaretclare

You could try remortgaging the amount of £35K but you'd need to be sure that you could pay a monthly mortgage.

A 'fixed income' need not be a problem, depends on what that income is. At least in retirement, you're not at risk of losing your income through redundancy or any of the other risks a younger person might have. It could be worth your while 'shopping around'. Try the Yorkshire Building Society: https://www.ybs.co.uk
Or Abbey.

I'm surprised you were allowed to do this at age 62. We did a similar thing in 2003 and one of us had to be 68 before we were allowed to. We did it because otherwise we'd have been paying a mortgage until we were 83 (Abbey) and we could think of pleasanter uses for the £260 or so a month. I actually remortgaged with Abbey from an interest-only to a repayment mortgage a couple of years before that (before my daughter died - a lot of things changed then) and I was in my 60s, so I know it's possible.

All depends on whether you want to go back to paying a normal mortgage, and whether you can afford to. Only you can answer that.

HTH

Old-Woman_4

Thanks Margaret - I had this idea that I could get an interest-only repayment for about £30k, and pay it off that way,
probably not very realistic - my 'ideas' never seem to be in line with the financial houses'!

I don't actually pay anything at present - that was the deal - I know I was stupid, but now feel I was badly advised by the advisor that I had used for several years!

margaretclare

Old-Woman wrote: »

Thanks Margaret - I had this idea that I could get an interest-only repayment for about £30k, and pay it off that way,
probably not very realistic - my 'ideas' never seem to be in line with the financial houses'!

I don't actually pay anything at present - that was the deal - I know I was stupid, but now feel I was badly advised by the advisor that I had used for several years!

Interest-only is not repayment, they are 2 different animals. With a repayment mortgage you pay the interest plus an amount of the capital owing, over a period of time. With interest-only you are supposed to have another 'investment vehicle' to pay off the mortgage at the end of a set period of time because it's what it says - interest only, no capital is being repaid.

I took on an interest-only mortgage in 1990, I had a good job then, but in 1992 I was made redundant and widowed at the same time. I had a PEP running alongside which was meant to grow enough to pay off the mortgage, but when redundant and widowed, I couldn't afford it. However, when I was 66 I remortgaged to a repayment mortgage which would have lasted until I was 83. We decided to do equity release 2 years later and, of course, I got stung for redemption charges because it wasn't 5 years. Like you, we don't pay interest now, we 'released' 25% and we're happy with it all. (I remarried in 2002).

You certainly were ill-advised - the idea of putting what's effectively a car loan on to a mortgage is not good news! Never put something on to a mortgage which is of such short-term value and cars depreciate!

Phone around and see if you can remortgage somewhere.

HTH