Interest only mortgage at age 90

[fortheloveofgodmary]

Nc for this.
I still don't know how but my retired parents took out an interest only mortgage around 20 years ago when they were in their 60s and retired. The mortgage is for £100,000. The mortgage is up/needs to be paid back in a few years when they will be 90.. There is no money available to pay it. Only one parent is still living and is on disability benefits and basic state pension with no other income.

What happens when the time comes to pay off the mortgage? It's causing a great deal of worry for my parent and I am really annoyed that they were given this mortgage with no ability to ever pay it off. I'm told the financial advisor they used fiddled the numbers to make them eligible. The mortgage lender has said to talk to them about it in a couple of years and not to worry but it's a huge worry as you can imagine.

Thinking about it - interest-only mortgages are normally sold with an accompanying endowment policy which is supposed to mature at the same time as the mortgage, and pay off the outstanding balance. but I'm pretty sure that a lot of people got their fingers burned with those some years ago when they found that the value of the policy at maturity wasn't enough to pay the mortgage off. I seem to recall there were a lot of mis-selling negligence claims a while ago.

I know it's very late in the day for your parent, but I would have a look into selling up and finding a suitable flat for them to rent, there are specialist housing associations you might be able to deal with direct rather than through the council list. And have the net sale proceeds sitting in the bank in case a care home is needed.

If they move into a flat that surely makes life a bit easier for you as well with no garden to sort out

Talk to the lender. Most don’t like to foreclose on properties - they may allow her to live at the property for a monthly rental amount that can be added to the mortgage until she dies.

Agree about talking to the lender first. Your parent is 90, disabled and needs a career, and as long as they can easily pay the interest payment and have plenty of equity, they may well extend the mortgage.

Who gave them a mortgage until they are in their nineties? Is this normal with interest only? I would also look into whether they were Mis-sold

If it wasn't mis-sold (and that's definitely worth investigating), I still can't see there would be a problem.

Bluntly speaking, any bank that will give a mortgage up to age 90 is already going to be expecting that the borrower may well not live to the end of the term and they will be planning to get their money back from the sale of the house after their death. No lender would ever lend to somebody that age without factoring the likelihood of them dying before the end of the term and working that in to their calculations.

At 90, with far more equity in the property than is owing, they are not going to be looking to throw a 90yo out of their home; they will just wait - with interest still accruing, of course. They may want to switch it to an equity-release plan, but that would be pretty much the same situation, just under a different title. All the while, the property value will be increasing, so they really have nothing to lose.

There will be £200k if sold surely your parent rents, and uses some of the £200k to top up rent over mortgage payments. If your parent is 90 then the £200k should see them ok for the rest of their life. I don't think you need to worry. If your parent had to go into a care home it would be paid to them anyway.

How financially irresponsible of them, sorry you are left carrying the can.

They have a few years yet so I wouldn't worry too much. The bank is unlikely to want the optics of turfing out a 90 year old who is vulnerable and you don't know now what her health will be like then. I'd just reassure your mum you will deal with it all and she'll have plenty of money to rent or have a nice care home etc when the time is right. Maybe get lpa in for finances ASAP so you can speak for her in a few years, if necessary.

If she is really struggling now and would prefer not to be on benefits you could start to talk options where she'd access the money by selling, avoid this worry about the bank and be able to afford rent. But really it makes more financial sense to stay until the term is up, especially as we're still in a turbulent time.

How financially irresponsible of them, sorry you are left carrying the can.

I think this is unfair. Maybe the parent who is now deceased was the driver of this plan and knew exactly what they were risking (nothing). They might both have been understanding of it when they took out the mortgage, but as the surviving parent has got older, they are starting to panic unnecessarily, maybe feeling more helpless and vulnerable with older age.

This is not a dangerous position to be in at all - if they are still alive, there will be several suitable options open to somebody aged 90 with £200K or more equity left, after allowing for the owed £100K. Financially speaking, they are ending their 'run' very much ahead and in credit, regardless of how it needs to be settled and administered.

Yes, is it really irresponsible to be 200k up at 90? OK many want the full house value and more as inheritance but for many people they have to find funds to pay for their parents funeral so 200k up to spend on rent etc seems like winning to me.

they shouldn't be having to worry about this at this time of life. It makes me so angry.

With the greatest of respect OP, your parents have got themselves into this position.

They chose to take out an interest only
mortgage and didn’t save any money to pay it off at the end of the term. Why didn’t they?

Also have they or you tried to talk to the bank hypothetically? What if.. look up their policies about vulnerable customers, it might be reassuring.

@fortheloveofgodmary no mortgage provider is going to want the publicity of evicting a 90 year old widow(er). As you know the house is worth more than the mortgage and so (sorry to be brutal) on the death of your surviving parent they will get their money back.

Nearer the end of the term, I assume 25 years; approach the mortgage provider again, explain the situation and ask if they would be prepared to extend the mortgage term by 10 years and to keep it interest only. The mortgage provider are getting a profit (interest) and in the long term will get their £100k back. The mortgage provider was being subtle when they said not to worry now and I suspect will be open to a pragmatic solution.

I don’t necessarily agree with pp WRT the mortgage advisor. Your parents will probably have signed to say the mortgage application e.g. figures, income etc. were correct. You need to understand how the financial advisor has protected themselves, whilst potentially exposing your parents to being accused of making a fraudulent application, before you decide to take action.

They chose to take out an interest only
mortgage and didn’t save any money to pay it off at the end of the term. Why didn’t they?

But they did 'save' the money to repay it - in the increasing value of their house! Leaving yourself unable to repay a mortgage due to complete at 30, 40 or 50 would be very unwise indeed; but by 90, everybody knows that they will very likely no longer be around to need a house, or otherwise they will have a very large amount of equity in the house and very few years left to need it to stretch to.

Interest-only mortgages are now widely seen as 100% foolish, but there are actually still certain circumstances where they do make good sense, if you know what you're doing.

Do you think they would have been better to rent instead and then find themselves potentially aged 90 with (hopefully) the wherewithal to continue meeting the rent payments (far more than IO mortgage payments), but with absolutely nothing to show for it?

What's the interest rate/monthly cost? Is it currently affordable, given interest rate rises?

Is your relative getting all the benefits they're entitled to? Pension credit is the obvious one if they only have the state pension and even if the award is small, it's a gateway to significant extra financial help.

Providing that they are able/happy to remain in the property, I agree that asking about extending the term might be the least worst option. After all, the lender should be reluctant to see a very elderly person have to move home at their age.

However, if the interest rate has significantly increased, selling and renting/moving into an assisted living facility might be an option.

Have a play with the numbers. If they put the equity into the best savings accounts (including fixed rate products, premium bonds and ISAs to shelter as much as possible from income tax) it should generate a few hundred pounds a month of interest that can be used towards rent, plus they could possibly also safely run down the capital. Plus they don't have to pay the interest. So if they are getting £600 pm in interest and are saving £400 in the cost of the interest only mortgage, that's £1000 pm they can use to rent somewhere, without touching the capital and before they're worse off than their current position.

Moneysaving Expert has some info, but this includes a link to FSA research suggesting 'no significant misselling' which I suppose is fair enough, as no-one can claim that they didn't understand what the term 'interest only' meant and they would have signed at the time for whatever income their advisor told them to state to qualify. So to have a misselling claim upheld, they'd have to admit to lying on their application about their income and/or falsely claim they were of limited capacity.

https://www.moneysavingexpert.com/news/2018/01/interest-only-mortgage-timebomb-act-now-/

She will have to sell and go into rented. Actually ( and this may sound cold) but then they can help clear out the house.

Can they sell and use equity to fund a slightly larger place for you, so they can live with you?

I was also going to mention interest rate rises. If they are on a variable rate, their monthly repayments will have increased substantially in the last year

Another one who thinks that extending the term has to be the way forward. Let the elderly parent stay where they are, bank gets it's ongoing interest, mortgage repaid on death or if they have to go into care etc and sell their home.

There are some really nasty people posting on this thread and making unnecessarily cruel comments.

This sounds like a reasonable idea, considering you are her carer.....?

My parents had this too, it was a mad time trying to save up and scramble around for money to reply. They both had Learning difficulties so didn't realise, they had to repay it at the end of the term. If your parents don't repay it, the bank will repossess the property. Do they have any savings at all? Could you buy the house for £100,000 and be it's legal owner, but allow them to live in it. It would be a good investment for you.

Firstly, sort out power of attorney as a priority to allow you the proper authority to deal with your parents financial affairs. Otherwise you are likely to hit some frustrating roadblocks further down the line.

It’s also worth (either alone or using a claims mgmt company, even though they will take a slice of any future comp) pursuing a potential misselling enquiry. A good start might be to ask both the financial advisor and mortgage lender for copies of the applications. You’ll then be able to review how accurate that application was and whether anything has been falsified by the advisor (eg stating that there was an endowment/investment vehicle to be used to pay off the mortgage at the end of the term).

I think, especially with rising rates, it would do you good to get this sorted sooner rather than later as otherwise it will just eat away at you and cause stress over the forthcoming years

Good luck and let us know how you are progressing

That's how I see it too.

Yes the mortgage broker was in the wrong too if they were untruthful but surely OPs parents need to take some personal responsibility? They were only in their 60s when they took out this mortgage so perfectly capable of understanding what they were doing and what they were signing.

This problem was always going to occur and thus the remaining parent can't be too surprised about it. Don't see they have any choice but to talk to the mortgage company about the options & take it from there. Ultimately, they may need to sell the property and move into rented or a care home/assisted living.

What was the original plan for this when they took out the mortgage? To sell?