Interest only mortgage help

[Worriedsickandscared]

Not sure if I should post here or not. Name changed.
Basically we have an interest only mortgage, due to finish in 3 years.
We want to downsize but still have 2 adult children living here so that does influence things. Both desperately saving for deposits.
My question is if we sell and clear the mortgage we will not have enough equity to buy another property so would we be able to get a small mortgage to cover the difference?
Example sell house for £350000 clear mortgage of £180000 leaves £170000. We have £30000 we could release from pension so looking at possibly new mortgage of £70000. Obviously this isn't taking into consideration moving costs etc. Annual income £60000.
We obviously need to speak to our mortgage people but is this an option in principle?
Please don't judge our obvious stupid mistake of financial idiotic choices. I know we have fucked up big time and I'm petrified. Both 59. Please help.
I've also posted this in property/diy but maybe some here is a mortgage/financial/broker advisor who can help.

@Worriedsickandscared

I think maybe first stop is our mortgage company Santander. Can we just speak with Nation wide even though we don't have any dealings with them?

Yes of course - Natiownide would be delighted to talk to a potential new customer! Check any penalties that might exist with your current lender though.

Have you thought about an online broker such as money supermarket? Easy than sitting on the phone for ages.

@Worriedsickandscared

I'm very confused. If we changed mortgage to repayment but reduced it by using our savings and 25%tax free pension. New mortgage of approximately £140000. Would that be a good or stupid idea? We stay in the house for a few years, reduce the mortgage amount and would have more equity to be able to move.

Yes good idea, although it does commit you to using the pension lump sum. But if it means you can afford the repayment then worth it (I still think you can afford the repayment without using the pensions, but maybe you have very high outgoings).

I'm still unsure why you'd still need to move in a few year though with this plan - this plan keeps you in the house.

We used John Charcoal and they were awful. Wouldn't recommend them at all.

Once the girls have gone we won't need a big house. Girls are planning to move further away and also want to move nearer to other daughter eventually so we are all in the same general area, if that makes sense.

Can you get the 25% tax free pension amount and still work!

I don't/can't work anymore

I think you need to take a holistic view of all your finances and pensions and the future.
What would be a mistake would be to choose something that sorts this issue out now but causes you more financial problems in old age. So you need to look at choices and the impact on pension payout etc and not just housing.

You need financial advice in the round, so contacting Step Change would be a good start. Our current B rg possible new mortgage providers will only look at the mortgage aspect and not your whole finances, to to speak to an overall financial L adviser firsts A quick fix solution is not what you want here.

If you can't buy somewhere reasonable for £170k then you are living in an expensive area. Why not move somewhere cheaper and still have the pension to live on?

I'm slightly amazed that you've made it so far in life with so little financial understanding (not helpful I know).
Before you speak to any advisors etc I think you should do some reading about mortgages somewhere like Money Saving Expert so that you understand what the different types are, what things lenders are likely to consider, what things you might want to think about etc

Otherwise you're totally dependent on someone else telling you what they think is best for you (and you might disagree if you had greater knowledge). It sounds like that's how you've ended up in your current predicament.

But a house for the £200k you'll have? Seems like enough to me.

You might need to look further afield, but you'd have no mortgage and that would be great.

Please don’t consider yourself stupid just because 20 years ago someone sold you something that was useful at the time but now turns out to be a problem.
Is your £60k income likely to continue past retirement? Obviously, it is not a good idea to take money out of your pension if you then don’t have enough pension.
You (your mortgage adviser) will need to do a thorough review of your income and expenditure going forward. Once your affordability is established it is much easier to suggest a Particular course of action.

Thank you for your kind words Userone.
Unfortunately you have no idea about my life and situation. You have no idea how long we have had our mortgage and why we decided to go down that road.
Obviously I have changed a LOT of the details.
I was asking for options on my situation. Obviously I'm not the only person in this situation and it's worrying.
And you are right I could move further away from my elderly parents in this awful time and also from my daughter who has a life limiting disease and find a property for £170000 but I'm not going to.
I'm upset, angry and bloody shit scared about this and having to cope with cancer on top has delayed us sorting this shit out.
I just wanted some help and advice on where to turn. Rant over.

Do be careful that you dont make choices that impact your pension and drive you into extreme poverty in old age. If you’re thinking about using lump sums or taking lump sums from your pension, the impact will be felt in terms of what is available for later....might seem a short term fix but might create more problems.

Go to StepChange for some holistic advice where they can look at all aspects of your finances....and without judgement.

So have you made around £170,000 and had a stable home all these years for the same price as rent?
Not sure why you are being so hard on yourself, if that's the case. Are you tired to that area? Not WFH? £170,000 can buy a property outright in other areas.

Thank you.

Tied to the general area and unable to work from home

What is the cheapest house in the area you could all fit in if you did want to move?

None...prices for 1 bed flats are over £180,000

But thinking about the pension thingy. If we did use the tax free 25% lump sum and our savings, we could possibly remortgage and get a smaller mortgage, ie £30000 pension and £15000 savings. Then could stay in the house and eventually downsize, pay off any existing mortgage and possibly still have equity?

Yes, but if you take 25% out of your pension fund (it is tax feee but clearly reduces the pot) then what impact will that have on your retirement income? You need to be thinking about ensuring that will be enough to live on as well as housing.

Might it just be that you need to accept you can’t afford to live in your expensive area and retire comfortably? By moving away you can buy a place with your equity and have more money in your pension.

It’s hard choices and quite likely you can’t have everything, but do take the long term view about pension income on a monthly basis and not just the spending of a lump sum on housing, which will reduce your pot.

Whose pension pot would the 25% be coming from? If it’s your DH’s and he still working then is it still tax free? (I don’t know, I’m asking).

In that case it brings it back to my original question, to sell, pay off IO mortgage and see if we can get a small mortgage to cover the short fall. Like I say, we can't move too far due to various family commitments.

OP I know a lovely lady who is an independent financial adviser and is really good at unusual situations. Luckily the days of needing to live near your IFA are long gone so if you'd like her details feel free to PM me.

Minicooper could you please. I just want some advice on options. I'm thinking if we could move and get rid of IO mortgage and take a smaller new mortgage it could work.
Interest rates are much better than we are paying so any 'proper' advice from a professional before we speak to our mortgage people would be great x

I’d be very careful about using your pension money. Is that all the pension you have? What will you live off without your own pension savings in retirement?

Many places will lend into your 70s now, especially if you have a good pension. Don’t feel stupid, I think they’re are about a million interest only mortgages so you are NOT alone in this situation.

Make sure any Financial Advisor is properly qualified but they will definitely be your best bet.

Thank you x just feel as embarrassed as much as anything and obviously can't discuss with my friends.