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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To wonder how my parents will afford a home?

88 replies

Chocwocdoodah · 19/12/2016 20:12

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.

OP posts:
SillySongsWithLarry · 19/12/2016 21:05

Could you pool resources and use their equity with whatever equity you have and buy a bigger multi generation home?

1DAD2KIDS · 19/12/2016 21:05

2 bed flat asking price 0f £67,500 in North Lincs (sure it could be knocked down in price). 3 bed terrace houses starting from £50k upwards.

To wonder how my parents will afford a home?
NiceFalafels · 19/12/2016 21:07

One bed retirement flat?

Justaboy · 19/12/2016 21:08

200K "ish" around 660 to 700 a month interest only could they afford that sort of level ?.

You take on the BTL mortgage and then inherit the house and increased value after time maybe?.

CapsicumCat21 · 19/12/2016 21:09

How did they get an interest mortgage with no means to pay it off???

I thought you had to show how you would pay it off before you could get one? I had one but had to take an endowment to pay it off and another one I was going to pay off with my pension lump sum but had to get paperwork from my pension company to prove how much I would get?

Sorry no helpful advice but are sure there's nothing in place to pay it off?

YelloDraw · 19/12/2016 21:12

How did they get an interest mortgage with no means to pay it off???

Because back in the land of pre GFC you could get a 110% interest only mortgage with nothing but the expectation of rising prices to pay off the capital.

Luckily we have learnt from that and now require a repayment vehicle.

Biscuitsneeded · 19/12/2016 21:13

Would you have enough room/inclination to build a granny flat/annexe (1 bed only) in your garden? Or pool your resources and buy a place that has this?

JellyBabiesSaveLives · 19/12/2016 21:13

Would you and your siblings be able to buy their house on a joint buy-to-let mortgage? And then rent it to them? You'd need a deposit but your parents could gift you the 70k for that purpose (no tax implications as long as they live for another 7 years). But they'd need to be able to pay enough rent to you to cover the BTL mortgage payments. The rate will be higher than they've been paying.

shouldwestayorshouldwego · 19/12/2016 21:16

If you all live in SE then there is little point in them moving to N Lincs or IOW just to own a property. My parents moved (5hr round trip) and now they are not in a great way it is a PITA them living so far away (although nearish to my sister).

Newbrummie · 19/12/2016 21:17

I can't even rent with a ccj but I got a good sized mortgage.

shouldwestayorshouldwego · 19/12/2016 21:20

Sorry it posted too soon. It's only because she moved that there is anyone near them. Our jobs and the dc's schools keep us here but I can't just pop round with some shopping or pick up a prescription. Somewhere small and nearby would be preferable.

Original poster
Chocwocdoodah · 19/12/2016 21:21

Would love to live in a multi generation house with them. Unfortunately MIL is desperate to live with us but we don't want that as she would drive us mad!!! So if we lived with my folks, MIL would probably never speak to us again - stupid, I know, but unfair on DH.

Yes they got an interest only mortgage back when they handed them out like sweeties. I would love to help them out by buying theor home or something like that but I have to consider how that would affect our ability to move ( we have kids and want to upsize) and I'd feel it was unfair on DH top commit so much financially to my side of the family.

OP posts:
NiceFalafels · 19/12/2016 21:24

They need to stay close to family. Even if it means a tiny plane. No need for a second bedroom

Wolpertinger · 19/12/2016 21:26

Even in the SE you can find Park Homes or retirement properties for £150K or less.

Which isn't £70K but it's a start.

NiceFalafels · 19/12/2016 21:26

Have any of your relatives a garage that can be converted and extended?

Pikey78 · 19/12/2016 21:32

What about getting a lodger where they are now? Could they somehow use that income to stay?

DinosaursRoar · 19/12/2016 21:33

If the equity they have could buy a flat/house outright in another part of the country, could they do that and rent it out, then rent somewhere small near you, using the rental income from the other property as a pension top-up (but making sure they save a % for voids/maintenance work to the property).

Otherwise, shared ownership seems the best bet.

Realistically, they need to rent and then invest the lump sum they have in a way that won't mean they run it down.

Newbrummie · 19/12/2016 21:49

Realistically there is no investment vehicle at all paying 5% and that's just keeping up with inflation not taking account of tax, rising rents etc. At their age tbh they'd be crazy to sell that house. The next ppi thing will be interest only mortgages. I would refuse to move or sell in their shoes, continue paying the interest wtf is the bank going to do about it ? Put them in front of a judge and they would open the flood gates. I think the bank would rather quietly take their money.

Original poster
Chocwocdoodah · 19/12/2016 21:53

Newbrummie I have had similar thoughts but not sure if it's realistic?

There's no one in the family who can convert any part of their house unfortunately.

OP posts:
reallyjustreally · 19/12/2016 22:01

newbrummie

They'd repossess. You breach your mortgage contract once you reach the end of the term and don't repay it. Lenders have and will repossess for this. No floodgates were opened and the judges granted it. Please don't listen to this advice OP.

lunchboxtroubles · 19/12/2016 22:01

Ideally they would stay in SE.

to be blunt, ideally they wouldn't be in this position. choosing to stay in the most expensive part of the country doesn't sound ideal....

Original poster
Chocwocdoodah · 19/12/2016 22:06

You're right, lunchbox, but all of their family, friends and jobs are in the SE. They're getting older - they need to be near family. Also if they move away, they won't ever afford to move back.

OP posts:
Newbrummie · 19/12/2016 22:10

They wouldn't repossess. They tell you they will but they won't. Friends of ours didn't pay their mortgage for 18 months and Santander did not even get to court. Realistically if there's any way they can keep you in that house and paying they will because the new house owners might not have their mortgage with them and that costs them money.

Newbrummie · 19/12/2016 22:14

I can't see how you can loose really, talk to the lender, keep paying so there's no arrears if it gets to court so be it, you've bought time and they can't sell cheaply anyway, they have to achieve the best price

Mouikey · 19/12/2016 22:33

Sadly I don't think shared ownership is an option primarily as it is aimed at first time buyers (no matter what age) and not for someone coming out of a mortgage - although some HA's may consider this differently (unlikely in the south east). I only say this as a previous SO participant! We sold to an older gentleman (cash buyer but never previously owned a house).

Go talk to a good financial advisor and ensure they are honest. Sadly this is likely to happen to lots of people over the next few years, but to be honest if they only pay £200 per month 'rent' and come out of it with £70k that's not bad going - it could have gone a very different way.

Good luck