To wonder how my parents will afford a home?

[Chocwocdoodah]

Posting here for traffic. Will try to keep this short.

DPs were rubbish with money when my siblings and I were kids. As a result, they found themselves in massive debt a few years back and had to take out an IVA to pay off their debts. To their credit, they've done amazingly well and will have paid off the lot - £50k - within the next few months. Obviously though, the IVA will show on their credit rating.

Now the main problem is they have an interest only mortgage and the term ends next year. They have no means of paying it off so will have to sell up. They spoke to their lender to see if there were other options but the best they could offer is to agree to give them a little extra time to sell. They are in their 60s and only earn about 35-40k between them.

My worry is how the hell they are going to afford somewhere else to live? We think they'll get about between 50k -70k profit from the sale but their age, income and the fact they've had an IVA means they almost certainly won't get another mortgage. They think their only option is to rent which they don't want to do (I don't want them to either).

I've looked into those Home For Life schemes where a company buys a house at a discount for you but you put down a deposit. It means they'd have no money to leave as inheritance (as the company keeps the profit from the sale once they die) but none of us gives a stuff about that - we just want security for them.Unfortunately they're not old enough to get a big enough discount.

What other options are there? I'm worried they're going to end up in an extortionate, tiny rental they neither want nor can afford.

No worries 50 bales!

Yes, I see the point about them already basically renting anyway. The other thing is as the current mortgage is interest only and rates are so low, they've only been paying about £200 a month (!). They're in for a huge shock if/when they rent/part-buy something else!!

Have they looked to see if there are any Older persons shared ownership schemes in their area ? ( there are some around but not a lot , its true.)..

To find out they should look up Help to Buy South or Help to Buy East and South East websites ,.. they will need to register , their interest , and it would be good to do so anyway , many shared ownerships dont have age limits and they caould perhaps get independent mortgage advice through the sites Homebuy agencies. (These are govt backed websites and agencies)

But I'd anticipate that a visible IVA would be a bigger impediment to a private rental I wouldn't worry about that. They would have enough cash in the bank to pay rent upfront for the year initially.

Shared ownership is also mainly renting though - so would have thought a good credit score was also important for this..

They could always approach a fee-free broker just to see about the possibility of remortgaging to stay in the home. Some lenders do over 60s and poor credit products. And the fact there's some equity in the value of the house goes in their favour too.

Help to Buy South East
Help to buy south

I like the idea of a retirement home - some gorgeous ones in out area.

Help to Buy for older people also sounds good - thank you.

Speak to a good mortgage broker about what is / is not likely in terms of getting a mortgage. Just because their current lender won't extend the term doesn't necessarily mean that another company won't lend, particularly if they have a good amount of equity.

Do they have any pensions at all that they could draw some money from?

I really think they need to stand on their own two feet OP. They'll have 50k plus 35k per year income so surely that's enough to live on...?

Speak to a financial adviser, Equity Release can be used as a repayment vehicle for interest only mortgages, but it won't be suitable for everyone. Obviously pros and cons of doing this, but a lot of Equity Release providers have developed products to plug this gap (I'm not an adviser, but work in the industry). Not sure what impact the IVA will have though as most equity release products are still a form of mortgage it's just repaid when you die or leave the property, e.g. move into a care home. It's repaid from the proceeds of the sale of the property. Find a qualified financial adviser - look up the Society of Later Life Advisers (SOLLA) who have advisers who specialise in all aspects of later life/retirement planning or search on the Equity Release Council website.

You're right, basicbrown, but while that sounds a lot of money, there's a limit to how much longer they're both going to be able to work and as every penny they've had in the past 10 years has gone towards paying off their debt, they have no savings, pension - nothing.

Mortgage brokers, I expect that someone might do them a deal on this. It might not be quite what they or you would like for them but that's the way interest only goes!

See if there might be anyway they could sell the home to you, maybe and rent it back off you?. Sounds daft but that might be a possible.

One bit of info missing do you have any idea of the current value at all?

Great - thanks so much Plug.

I can't remember the exact value but I do know they'd come put with about 50-70k. The house is worth £200-and-something-k

Renting does have some advantages so they might want to consider it, gives them flexibility if they need to move nearer to family later on, they won't have to worry about repairs or big expenses like roof repair, they will be eligible for housing benefits if income is low, if they need sheltered or nursing accommodation they will not be expected to sell off a property to pay for it. I know there are downsides, but I imagine a lot of landlords would be happy to rent to an older ,reliable couple.

I know you have just said no to this, but I would so suggest a static caravan. I have a friend who lives in one which is a mixture of holiday caravans and permanent residences. It is brilliant- a shop / swimming pool . gym / restaurant etc on site. Set in a lovely area with green space. Well kept. Great community activities and feel. She bought hers for £30,000 (about - and it was not new) and it sleeps her, her ten year old DD, and has a veranda etc. I would do that in a heartbeat if I could not afford a home.

50-70k they could buy a 2/3 bed place outright in North Lincolnshire and a few other parts of the North. I take it they don't live in a part of the world that affordable. Just throwing it out there that if they moved to another part of the country they could buy out right and be mortgage and rent free with 50-70k.

What's the council housing situation for older people like where they live? I know in my area it's surprisingly good (also SE, and there seem to be quite a lot of council retirement places going to people in band D who have been waiting for

If they can afford a mortgage, you may be able to guarantee for them (if prepared/earn enough)

Agree with chatting with a mortgage broker who has access to the whole market just to check their potential for a mortgage.

Can highly recommend London & Country. Totally free.

With a static caravan, be careful of site fees, service charge, requirement to replace home etc.

A modest but pleasant 1bed flat on IOW is doable outright for £70k it seems.

I'm not sure about the council housing situation where they live.

Ideally they would stay in SE.

If you could help them out a bit with modest costs, maybe they could avoid housing costs entirely?

Where abouts in the SW?

I honestly think renting a retirement place is the best option will be secure tenancy or look at housing association/council. They have struggled with debt their age will go against them the mortgage repayments are going to be sky high