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Original poster

Interest only mortgage at age 90

76 replies

fortheloveofgodmary · 07/05/2023 22:16

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.

OP posts:
LizzieSiddal · 08/05/2023 08:21

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.

This is NOT a good idea as HMRC would have something to say about the fact the house has been undervalued. If the Op wanted to buy the house she’d have to pay full market value for it.

Motheranddaughter · 08/05/2023 08:30

Have a few clients in this position and in a couple of cases the Lender refused any extension
Both times the family paid off the mortgage
,once by remortgaging their own home

QuintanaRoo · 08/05/2023 08:32

I was missold an interest only mortgage about 25 years ago. Was young, got the hard sell from a salesperson. About 2 years later I realised it was shit and complained and was immediately given all my payments back plus 7% interest. Took one phone call. Certainly worth a go.

FirstnameSuesecondnamePerb · 08/05/2023 08:38

Well.surely an equity release would be the answer in these circumstances?

MammaTo · 08/05/2023 09:15

You can ask the bank what they were told the method of repayment would be at the time it needed to be paid.
They may have investments coming to fruition they might have forgot about? Generally what happens is people say they’ll sell the house and when it comes to the nitty gritty of an elderly person selling up it’s too much to deal with for them.
I’d definitely speak to the bank about a term extension.

WeBuiltThisBuffetOnSausageRoll · 08/05/2023 10:41

Have a few clients in this position and in a couple of cases the Lender refused any extension
Both times the family paid off the mortgage
,once by remortgaging their own home

Apart from other options, would it not be possible to sell to an investor/landlord - maybe at an advantageous price - with the proviso that you are allowed to stay there (paying market rent) for the rest of your life?

They would then have a guaranteed income for the next few years, whilst their property appreciates in value; then, once you are gone, they would have various options open to them.

somewhereovertherain · 08/05/2023 10:46

Sell up, rent and let them enjoy the money.

Original poster
fortheloveofgodmary · 08/05/2023 10:58

Thank you for all the replies. I'm going to suggest ringing the bank first and asking about extending the term. The house is adapted to their needs and they do not want to move. I think a move would cause a rapid mental deterioration and possibly necessitate going into a home.
I cannot pay off the mortgage or move.
Once the bank's position is known we will go from there.

I don't think there was any plan to pay it off. I think they assumed they'd die before it was up. They were both retired on basic state pensions when they took out the mortgage.

I won't have LPA. That is going to be my siblings.

OP posts:
GasPanic · 08/05/2023 11:03

I thought that IO mortgage companies were quite aggressive about sending people letters asking them how they were going to repay the principle and had a payment plan in place, especially in recent years, so hard to see how something like this can come out of nowhere.

As other people have indicated, so long as you are not underwater/close to negative equity on the house value compared with the repayment there is almost certainly some way of re-financing so that the house can be kept for the current owner... BUT this will almost certainly not be the most financially efficient wayof resolving the issue and will likely lead to considerably reduced inheritance as a result.

Original poster
fortheloveofgodmary · 08/05/2023 11:14

I'm not bothered about any inheritance. If I get any it will be nice but if not it's not an issue. My parents were always in a poor financial position all my life.

This has been a worry for several years now.

The mortgage payment is currently around £350 a month. It's gone up and up over the past year from around £100 a month. It's a constant source of stress for them.

OP posts:
LizzieSiddal · 08/05/2023 11:26

It's a constant source of stress for them. Well they do have choices so they need to make some sort of decision so they don’t have this stress. Doing nothing is not an option as the mortgage is coming to an end.

They or you on their behalf should contact the mortgage company asap to see what options they can offer you. As a pp said evicting a 90 year old disabled person from their home is not a good look so they may well be really helpful to you. Emphasis how vulnerable your parent is when you speak to them.

And remember they do have £200,000 sat in that house. They could move to a nice rented flat and easily afford that, plus have extra money to spend on whatever they liked.

LizzieSiddal · 08/05/2023 11:28

Apologies @fortheloveofgodmary I missed your post at 10.58. Ignore my post!

GasPanic · 08/05/2023 11:34

fortheloveofgodmary · 08/05/2023 11:14

I'm not bothered about any inheritance. If I get any it will be nice but if not it's not an issue. My parents were always in a poor financial position all my life.

This has been a worry for several years now.

The mortgage payment is currently around £350 a month. It's gone up and up over the past year from around £100 a month. It's a constant source of stress for them.

Sounds like it is tracking the base rate (350x12)/100000 = 4.2%.

It will likely go up another 0.5% before August (assuming the MPC rises rates by another 0.5% which I think it will).

Original poster
fortheloveofgodmary · 08/05/2023 16:15

Thank you to everyone who has taken the time to reply. It's been reassuring and I have a plan of action now.

OP posts:
Twiglets1 · 08/05/2023 16:32

fortheloveofgodmary · 08/05/2023 16:15

Thank you to everyone who has taken the time to reply. It's been reassuring and I have a plan of action now.

Good Luck with it.

I'm sorry you are having to deal with this as think they should not have got themselves in this situation in the first place when they were only in their 60s.

However, the situation is where it is so hope the bank/building society has something reassuring to suggest this week.

nemo99 · 09/05/2023 01:11

It sounds to me as if your parents have been very sensible - whether by accident or design. What on earth is the point of dying while owning a £300,000 house? You cannot take your wealth with you when you die - and if you try, you will not succeed. Ask Tutenkhamun. If there are those you wish to benefit on your death, then, ok, maybe ensure the house is mortgage free at death. But otherwise, it seems daft to me that so often, there are people - typically elderly - who are asset rich (have a house) but cash poor, and therefore are not able to live (consume) in a pattern they would wish.

Having said that, I appreciate that having survived to where the mortgage is actually repayable must be a significant worry for you and your parent, and I sympathize. I definitely recommend talking to the bank, and as others have noted , if the bank is unwilling to co-operate, investigate RIO mortgages.

SchoolTripDrama · 09/05/2023 01:23

Boomboom22 · 08/05/2023 00:02

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.

Receiving disability payments is not the same as "being on benefits" ffs! PIP is not means tested and paid regardless of wealth or income. It's for the added costs of being disabled. Even millionaires are entitled to it.

HadalyEve · 09/05/2023 01:24

There’s nothing to worry about
They won’t be forced to sell
Their home will not be repossessed

They can remortage the interest only mortgage probably with their existing lender. And the good news is with a much lower LTV (Loan to Value), they should be able to get a lower interest rate and may even be able to remortgage into a repayment mortgage and keep the same monthly payment.

HadalyEve · 09/05/2023 01:27

You can ask to extend the term of the existing mortgage, but that means you’d be signing up to a higher interest rate as that 20yr old mortgage was based on a much higher LTV.

Mumtobabyhavoc · 09/05/2023 02:06

When the mortgage is due for renewal the lender typically sends a renewal offer without a need to requalify. All that needs to be done is sign to accept and carry on. However, if you advise the lender of a change in financial circumstances you are alerting the lender to increased risk which triggers re-evaluation and potentially calling the mortgage (refusing renewal and demanding repayment).

I recommend seeking advice from an independent mortgage broker. You can give all info except name for advice.
If your parent can handle existing interest only payment I'd renew any offer.
Another option is to apply along with your parent and jointly repay. You may qualify together for a lower rate.
If renewed successfully perhaps look into a lodger to lessen the financial load.
Good luck!

WeBuiltThisBuffetOnSausageRoll · 09/05/2023 06:45

You can ask to extend the term of the existing mortgage, but that means you’d be signing up to a higher interest rate as that 20yr old mortgage was based on a much higher LTV.

Eh? Doesn't a significantly lower LTV usually translate to a better interest rate? Probably irrelevant, though, as no lender is going to grant a mortgage - at least one based on repayment within your lifetime - to a 90yo; it's only going to be a loan based on expected repayment when you die.

Soontobe60 · 09/05/2023 06:58

First of all, it sounds like this mortgage was mis-sold to your parents, so that’s your first line of enquiry.
Secondly, no mortgage provider is going to insist that a 90 yr old disabled person sell up their home and move into rented accommodation. The reality is, the provider will get their money when your parent eventually dies or has to go into a care home, as that is the point at which the house can be sold.
My dm took out equity release several years ago. She downsized twice since, carrying over the ER. She died last year leaving my very disabled stepfather who is in a home and when I notified them of her death, they were extremely helpful. Basically, as my SF does not have capacity, the house cannot be sold until such time as I’m awarded Deputyship via the Court of Protection. 15 months on from my DMs death, I’ve had a couple of follow up phone calls and a letter from the ER provider just checking in on where I’m up to with the Deputyship application. They’re happy to wait - obviously they’ll get their money with added interest!
You need to speak to the mortgage provider again and get them to clarify that they will not force your parent to sell their property to repay the mortgage.

Motheranddaughter · 09/05/2023 11:47

It is not true that no Lender will insist on the house being sold

HadalyEve · 09/05/2023 12:04

WeBuiltThisBuffetOnSausageRoll · 09/05/2023 06:45

You can ask to extend the term of the existing mortgage, but that means you’d be signing up to a higher interest rate as that 20yr old mortgage was based on a much higher LTV.

Eh? Doesn't a significantly lower LTV usually translate to a better interest rate? Probably irrelevant, though, as no lender is going to grant a mortgage - at least one based on repayment within your lifetime - to a 90yo; it's only going to be a loan based on expected repayment when you die.

Doesn't a significantly lower LTV usually translate to a better interest rate?

Yes, but you have to remortgage to get the current LTV to be considered. Extending an existing mortgage is just that, an extension and the interest rate will stay as is and that rate was based on the LTV 20yrs ago, which is much higher than the LTV they have now.

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