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.

I think you need to know what the debt owed in 6 years is.

If less than 93k perhaps there is an equity release scheme that could cover the payment?

Sorry cross post! Sounds like you have some good options to check out. Hope you get something sorted.

I'm going to go through all the suggestions with my parents this evening.

Thank you everyone - at least there is some hope now!

I really really appreciate the responses.

Do they have a life insurance policy as part of the terms of the mortgage? I thought it was a requirement.
It may also be worth contacting CAB to see if he's getting all his benefit entitlements.

As they are paying interest only, in 6 years time they will still owe 93K.

Sorry you are dealing with this. As a starting point go to citizens advice. And then onto expert advice from there.

Lots of dodgy stuff has gone on with loans and mortgages over the years, so never take the institution’s word for it.

But even if it comes to a sale, they would hopefully have a fair bit of equity.

I'd also say equity release over selling it to a company. Equity release means the house remains theirs, and there's a chance of some money being leftover after the loan is repaid depending on how long they live (I know that's not your motivation but it would be better than s third party getting the money).

Equity release is well regulated now after the horror stories of the 90s. It is an expensive way to finance, but if their priority is staying in the house then it suits their purposes, plus no monthly payments!

We don’t know what area OP is in do we?

If it was your Mums childhood home, did her parents not already pay it off? Did your parents remortgage it?

If you post on the House Buying Forum on MSE I'm sure someone will help, this situation has come up before.

I thought that one of the conditions of equity release was that any remaining mortgage had to be paid off. Where would the money be coming from to pay the £107k that is still outstanding?

To reiterate what a few people have said here (and making a few assumptions based on whats been said) equity release/lifetime mortgage probably looks the most likely route for decent conclusion.

As others have said this was fairly common pre-2008 and a lot of people ended up in similar positions post the popularity of endowment mortgages failing to deliver the returns people were promised.

An equity release mortgage would effectively mean they made no more repayments but the interest would accrue on the balancs due. Its typically repaid when individuals die or go into long term care.

As others have said, the main downside is that effectively the value your parents own diminishes quite quickly (compound interest), but they would be comfortable in the house until they die or go into long term care.

The main thing to be aware of is that it limits peoples options as they get older (for instance if one of your parents needed care in a specialist facility 70 miles away there would be bo capital left for your other parent to move closer etc).

This is a fairly common problem, and the long term implications should be fully discussed and understood with a reputable adviser - but it is likley to be your parents best route out of this challenge.

I hope thats helpful, and appreciating its a verg stressful time, be aware that there are solutions to these problems and your parents situstion is neither unique nor foolish.

@IanOsenfrote the equity release company pay it off, and the homeowner then owes it to them, but instead of monthly payments the interest compounds until the homeowner/s die, then its all paid off.

If there is enough equity sometimes the homeowner can borrow more than the existing mortgage so they get a lump sum as well.

The money would be used to repay the 107k (they can usually take up to 65% of the properties market value). This would mean they didnt end up with much cash in their hand, but theyd have no monthly outgoings anymore on thr house.

Oh and the debt is capped at the value of the house, so the equity release provider take the gamble of house prices dropping and the homeowner living long time.

Just to say you sound lovely OP. So caring about your parents. I am keeping everything crossed for you all that they can stay, and stay comfortably. X

I thought the debt would be whatever was borrowed ie the purchase price at the time of buying.

I suggest they sell the house. With the proceeds they repay the morgage debt. No more financial worry about imminent eviction.

Then they are debt-free with a large chunk of cash (lets call it 90 K after legal expenses.

Use the 90 K to pay rent on a small flat, possibly HA? BEFORE the capital runs out, they will qualify for housing benefit to help pay the rent.

Yep. All the major lenders are now signed up to the Equity Release Council and it's a prerequisite of taking out a lifetime mortgage with them that you get independent legal advice prior to make sure it's the right choice. The big bonus is that they get to stay in their home for the rest of their lives, which sounds like it's the number one concern at this point. They will be able to release some money from the house too, which might help with their expenses (this can be done as a lump sump or in a drawdown basis, so as and when they need it) if that's also a struggle, as presumably they don't have much in the way of pensions, etc.

Some good info here: www.equityreleasecouncil.com/what-is-equity-release/faqs/

Why can you not just remortgage in 6 years with another company and use that money to pay the debt off

Banks do mortgages into retirement, you just keep paying it

@AndTheWinners they only do mortgages into retirement if you have enough income to support it which it sounds like is the issue in this case

All the best op, although based on your parents earnings, how did they qualify for the mortgage, to begin with ?

Sell the house. Use equity to buy shared ownership property and get HB for the rent part. Or they may be able to buy outright an over 55 property as they can be cheaper due to the restrictions. My parents are very attached to their house too although it’s now obvious to me they should be moving to a bungalow or flat before the stairs get too much plus a smaller place would be cheaper to run and maintain. I also know a couple who moved to a park home in a beautiful setting but obviously park homes have their own risks although they obviously felt the home would last long enough to see them through.