Interest mortgage and losing the house

[bubbagumpSHRlMP]

Just wondering if anyone can spare a minute for some advice.

My parents are both registered disabled and my dad has a deteriorating lung disease. He stopped working when his diagnosis got quite bad and it became hard for them to pay the mortgage.

As a way around it, he began paying interest only. The mortgage was sold to another company I believe and he has paid interest ever since. I do not believe he has ever missed a payment. The house may have been remortgaged at some stage but I'm not completely sure so will check this.

In about six years my mum and dad will lose the house. This is quite scary for them - the house was my mum's childhood home and it's all they know.

We tried to write to the mortgage company and asked for another 6 years with continued interest payments... they essentially said that there was nothing that could be done about it and that was that.

From a legal POV I'm not sure what's what. All I know is it's heartbreaking watching my parents panic like this and I just don't understand what we can do to try and make this okay. They have no desire to leave the house and it's everything they know. Is there an organisation I can speak to? Or anything I can say to the mortgage company to get them to reconsider?

Any suggestions very much interested.

Do they have a decent amount of equity in it? Property prices have increased loads recently. Perhaps they could sell it to a reverse mortgage place for whatever mortgage is outstanding in six years. Obviously won’t be able to then pass it on but they’d have somewhere to live.

The mortgage company should not have let your parents switch or remain on interest only just without a repayment vehicle in place.

What was your parents plan to pay off the remaining capital at the end of the mortgage?

Ah this is a sad situation

when they say loose the house do they mean in 6 years the bank wants their money back so they will need to sell?

is there any equity in the home so they can buy another property? Is it because of their age that they can’t get another mortgage/income to mortgage needs?

the thing with interest only mortgages is that you need to sell to pay it back or start paying repayment mortgage to keep the home. If they are at an age that no mortgage companies will lend to them now then what options are available?

can you buy it? Can any siblings buy it? Probably a totally ‘out there’ suggestion because I couldn’t buy my parents house without selling my own…

did they remortgage for the full amount of house value then only pay back interest?

They may be able to remortgage with another company, so that should be investigated. Another option is a lifetime mortgage, which can let them stay in the house until the end of their life. This will often work out quite expensive, but may do what they need.

What’s the actual situation here though, why have they been told that they will lose the house in the first place?

It seems to have been very bad advice to have an interest only mortgage without a means of future repayment attached to it. Did they think about this at all at the time?

As pp. How much equity is in the house? When you say they have remortgaged - where they taking money out? If its your mums childhood home you would have expected to be paid off/mostly paid off by now.

Unfortunately no. My mum was a SAHM and my dad was a self employed taxi driver. Money was always tight growing up and I don't think we ever came close to paying off. Life just got in the way!

About 93k in equity

Also thank you for the responses!

This seems ideal - 93k equity. Is that good? I rent my flat so my knowledge of mortgages etc is extremely lacking.

I think you need more info. How big is the mortgage? What is their situation financially? Is a different bank interested in giving them a new mortgage if you are a guaranter (sp?) l, or if you are added to the mortgage? What is your own financial situation and that of any siblings? Can you buy their mortgage from them? Or can uou pay it off?

The good thing is, you still have six years to work with.

Depends on if they can find a home for £93000 in their area?

Hi OP, this is a difficult situation for them to be in. especially with such little time to try to resolve.

do you know how much the house would sell for today and how much they still owe?

If they’ve been paying the interest and owned house for a very long time in theory the capital balance shouldn’t be huge.

without those bits on information it’s hard to advise.

A lifetime mortgage would release the equity and allow them to stay in the home till they are both either dead or in care.

It does mean they won't have anything to pass on and they won't benefit from any further increase in property value, but they will be able to stay in their home and use the equity released for living/leave that as their legacy.

Maybe worth speaking to a mortgage adviser about it. They're often not a great idea for various reasons but this is one situation where it probably is.

Hello! Will get as much information as I can. Sorry was in a bit of a rush getting it out!

They owe £107,000 and the house is worth about 200k.

It really depends on their age and where they live. 93k would be a good deposit if house prices are quite low where you live. Could they get a small mortgage to take them to retirement age?

How much us the outstanding mortgage, how much is the house worth?

It doesn’t sound very much for a home that’s been in the family two generations, although it’s comparatively more in the north east than the south east, for example. Do you know how much the house is worth? The ratio between the two is the LTV (loan to value) and that is important.

If they do have to move, it would be better to do it sooner rather than later. The local authority should have a housing adviser to go through their options and a hood independent financial adviser (IFA) might also be worth a try.

If your mum was a SAHM and your dad was a taxi driver I take it their pension income isn’t brilliant? Just state pensions?

This seems like another really good option.

We aren't bothered about keeping the house once my parents have passed away. My sister and I aren't financially stable enough to take over payments and to be honest we just aren't that keen on the house. My dad relies solely on disability allowance.

I will chat through this option with him. Thank you! If this is possible then I think this would be the way to go.

I'd talk to a financial advisor...
see if you can get a new repayment mortgage.

You and a family member or sibling could try to get the mortgage as they'll pass it onto you anyway?

Solicitors can change the deeds etc

Sorry just to add - my sister and I aren't bothered about inheritance. As long as mum and dad can enjoy the rest of their days in their home that'd be enough.

That’s more than 50% LTV which limits options with no earnings coming in, but you really do need professional advice. It might be that a council retirement flat or bungalow would be the best bet.

Whether it is good depends on the loan to value ratio so 93k equity in a 200k house is good in a 500k house not so much. Property will probably increase as well over next six years so equity will increase.

A reverse or lifetime mortgage loans you money against your house that you don’t pay back instead they charge you relatively high rates of interest in comparison to a normal mortgage and then when you die or go permanently into a care home the house is sold and they get the money back plus all that lovely interest that has been compounding

They wouldn't qualify for a council/HA property where I live due to their equity.

That’s nearly always true of general needs (working age)housing, but often not true of 60+ housing. It varies by area so worth looking into.

@Sortilege it's what a do for a job, all of the local authorities in this area have an income/equity limit on their housing register. It's considerably less than 93k. Like you say though, it may be different in other areas.

Its definitely worth speaking to a lifetime mortgage / equity release adviser as this is a more common scenario than you'd think. Many IFAs are qualified but high street mortgage brokers are getting qualified now. There's lots of options. They'll need specific legal advice too.
VouchedFor is the best place to look for recommendations - like trip adviser but for mortgages/financial stuff.