Elderly dad, interest only mortgage mess!

[Pinkclouds80]

This is a complicated one but anyone with similar experiences?

My dad (72) was sold an interest only mortgage on the house he owned with my mum in 2011, for £108k. It ended in 2021 and since then he’s just made the payment every month by standing order. They’ve got in touch a few times to ask how he proposes to settle the balance and for a long time he pretty much ignored them. He’s got some physical and mental health issues and was overwhelmed, essentially.

Last year they called and were more assertive about him needing to settle the balance and he agreed to speak to a broker they referred him to about equity release to pay the balance. The house is in a very poor state of repair and extremely cluttered so when the surveyor came they said he couldn’t have an ER without doing some essential works (new boiler, guttering, roof works). We wrote to Birmingham Midshires and said give us 5 months and we will do the works and put the house on the market.

For a few reasons he’s not managed to get the works done and I think BM are gearing up to seek possession. At 72 on a state pension he won’t be able to service the interest on an equity release anyway, he was quoted about £600 a month.

I am interested in whether BM have a strong case to seek possession, given that they seem to have just let the situation drift for 4 years - every month he’s made the payment so isnt there a de facto contract of sorts? Ideally he wants to stay in the house and just have a lifetime mortgage, maybe with an order to settle the balance when he dies? The whole thing is so sketchy and BM seem to send him standard template letters about being in arrears - which he isn’t?

Another complicating factor is that while he and my mum divorced in 1998, she is still on the deeds and technically joint owner. She’s long since remarried but legally is in the picture.

Congratulations and thankyou for reading this far! Any pearls of wisdom very gratefully received

OP never said that the house was bought for £108,000 though. She said tbe mortgage taken out in 2011 was for that amount.

ChompinCrocodiles · Today 09:01

BM seem to send him standard template letters about being in arrears - which he isn’t?
When the mortgage term ended, the entire remaining balance would be considered to be an arrears balance as he failed to repay the amount due by the agreed date. Him continuing to make small monthly repayments won't change this.

The bank are well within their rights to seek possession and to be frank, considering the time already passed, this could be at any time. Don't think the fact it's already gone on for years is indicative the bank will continue to be 'lenient' - recovery has likely either been mismanaged by their recoveries arm, which could be corrected at any time OR this debt just hasn't fallen into a priority area for them thus far, which again could change in an instant.

Just to expand on this point the lending rules have gotten stricter and the lender is not really allowed to let arrears to build up way over the borrowers repayment ability. And once the lender decides he cant refinance they need to take steps to recover the money and stop extra charges.

So once they issue an arrears notice they have a process in place which is formulated by what the courts would accept as good faith actions by the bank.

They can prove they worked with DF (gave a delay of months to put it up for sale) to resolve the loan before being forced to reposess the house. Remember the judge is human to and will not want to make a 72 year old "homeless".

And a link fyi
https://www.moneyhelper.org.uk/en/homes/buying-a-home/government-help-if-you-cant-pay-your-mortgage

Highly odd indeed, but that is what happened. She just walked away and every few years would say “you need to pay me off” and he would say he would. In 1998 the house was in negative equity so there was no imperative, but it was their marital home and she stayed on the bloody deeds.

Thankyou for comment, useful!

Blimey!

So, sell at £450k, repay £108k, leaves £342k, minus say £6k of fees = £336 divided by 2 = £168k for your Dad and £168k for your Mum.

I'm amazed your Mum didn't force him to sell when the market bounced back.

So I’ve had to try and summarise this absolute carnage but yeah, I’m amazed too. That is literally what’s happened though. She says will walk away for £50k…but he is of the view that the only equity is there because he has paid into the mortgage for the last 30 odd years, so unlikely to concede gracefully.

It is pretty stressful!

When the house is finally sold your mum really should get legal advice to get her share. He may well have been paying the mortgage but he got to live there. Is he resistant to clearing the house? You say it is extremely cluttered but if you could get it cleared, list it so people can see the potential and someone looking for a project or builder that does flips will likely go for it. Sell it and he could buy a one bedroom flat outright.

Given that your Mum left in 1998, was the house mortgaged then? Dud he take out a new interest only mortgage in 2011? The mortgage company then would have noted that she was on the Deeds.

It’s tricky because your Mum could potentially put a block on the sale.

Your Mum needs legal advice. She could counter that had she been paid out (say) £100k 10 years ago, she could have invested that in another property or interest bearing account. NO WAY would I walk away with £50k in her shoes. Her leniency has allowed him to live in a house he couldn't afford for the last 26 years. Equity has only built up because she didn't force him to sell. If you love your Mum, make sure she gets legal representation.

Was the house originally paid off by the time your mum left your dad and your dad took out an interest only mortgage to access some money, a bit like equity release?

Are you in a position where you can take out a mortgage to pay off what's left of the house? For a percentage ownership or something? Maybe enough to pay off the mortgage and the £50k to pay your mum off.

Then your dad can pay the mortgage to you?

Obviously not ideal, but if it means he doesn't lose the house.

I have had dealings with BM regarding my late husband’s mortgage, and one thing I will say for them is that they were very patient and pleasant to deal with. Yes, their computer spits out worrying letters from time to time, but the staff have always been very helpful by telephone.
I assume that when your father took on the mortgage he said that he would repay by selling the property?
If he is planning on selling and actually puts the property on the market that will probably keep them happy for maybe 12 months or so.
If he doesn’t want to sell are you in a position to guarantee the mortgage? It’s possible to have a mortgage up to the age of 80. That would, of course, just delay the inevitable sale.

Nope if DM part owns the house and not the loan she gets her cut before the Bank

So DF gets what ever his % share of the house and the bank gets paid from his share.

This is wrong. The capital sum of the loan is paid to the bank first, the remainder is then split depending upon either what was agreed (either verbally or in writing) at the time of the divorce, or in the absence of any other agreement, as it is held. So either as tenants in common percentage as agreed, or as joint tenants 50/50.

Did he take a lump sum from his private pension? There was a period (before 2011, I think) when pension mortgages were a thing, and interest only mortgages were given on the understanding that pension lump sums woukd pay the balance.

Your father needs to get the house on the market asap and if you want to help him, start decluttering asap. He would be EXTREMELY foolish to start a fight with your mum over her insanely generous offer to walk away for £50k. If he does, she is likely to say ‘sod that’ and go for half - and take legal advice about your dad effectively stealing her equity in the house via equity release. You also need to think about what will happen if she takes her share of the profits and he is left with less than £2k. He may need to rent. What a scandalous mess interest-only mortgages were.

Sympathies OP, because the big issue here is your Dad.

There could be any number of sensible ways forward but he has already let many slip by, and if he digs his heels in over £50k to your Mum that will delay the sale, cause a big bill for everyone if she gets a lawyer involved, he could end up owing her more, and the bank could lose patience as another period of leniency to allow for the sale of the house falls through.

We do not have all the facts here, and it is possible that neither do you.

Will your Dad listen if you give him a stark ultimatum (once you have established s many facts as you can) : e.g Check the bank will allow you to sell, check your balance once bank and Mum are paid off, check you can buy a flat for that...go ahead NOW or you could feasibly end up homeless!

Nope, you are wrong, the post you are referring to is correct. You are thinking of when there is a jointly owned property with a joint mortgage. This isn't that.

The mother owns half the property and is entitled to half the value. Not half the equity after the father mortgaged in his own name only. He owes the debt, not her. The mortgage is irrelevant to her.

It was the mortgage that was £108k in 2011, not the value of the house.

It's incredible that all three of you in your family seem to be so clueless about how mortgages work OP (no offence but just ... goodness me).

Your Dad's only option is to sell. That's what people do when they have interest only mortgages and no other lump sum they've been investing in alongside over the years, or no other property to sell, to pay back the Building Society.

If the EA is saying they'd market for £450,000 when the house is in that condition then go for it. Your Dad has obviously been completely irresponsible about upkeep and repairs and that is never going to change now. He'll have to face facts and move to a small flat. It seems there's no point in him having a garden anyway.

Explain how the bank can force a person who was not a party to the contract to pay back a loan?

The 2011 loan is not her debt

If she owned a share in the house before the loan was take out its hers the same was the money held in her bank account is hers.

The house is uses as security against a default.
But only DF share can be used DM share cant be taken (given) away. DF cant use someone elses legal property to pay a debt.

Unless DM signed to allow her property be used to pay for a now legal strangers loan the lender has a risk of poor security.

DM needs to agree to the house sale and/or turn up at the repession hearing.

If DF "funged" the application or the lenders checks were poor its not DMs problem. If its still a legal matrimonal home in 2011 the lendet has an extra problem.

If there is a preexisting contract eg the divorce agreement says he gets the house or a larger share or he wants to claim extra the lender may become involved if they are still owed.

But the courts wont allow DF or the lender to use her property to settle DFs outstanding amounts.

It would be astonishingly unusual for the bank to agree a loan in one name without approval from the other owner though, so it's most likely she did give some sort of consent.

I would agree
But mistakes do happen.

There is a very small possibility that the lender missed the legal ownership.

Or that the loan was missold / converted from other unsecured lending and the house had a high market value (as if the house was in good repair it is valued at £550k today) and DF could meet the repayments so the lender was better off in the long term.

Which is why the OP should do a GDPR request.

Oof, what a mess. The one thing I’d advise against doing is getting you dad to move into a ‘care village’. We had a family member move into one of these which all seemed great until the monthly bills started to roll in… and then a decline in health… the care fees were astronomical. I think these places only work well if the person is well! It was prohibitively expensive for them to stay there. (Being charged £15 just to be wheeled in a wheelchair to get to communal activities). Your dad doesn’t sound like he has anywhere near the money he needs to move to somewhere like this. Our family member moved out… their savings in tatters.

THIS, writ large

Equity has only built up because she didn't force him to sell. If you love your Mum, make sure she gets legal representation.

Because...

The mother owns half the property and is entitled to half the value. Not half the equity after the father mortgaged in his own name only. He owes the debt, not her. The mortgage is irrelevant to her.

Hopefully you all can sit down together and come to an amicable agreement about the division of assets. Not just the house, but everything else they should have sorted when they split up.

A divorce mediator may help. But first and foremost get the house ready for sale and get it SOLD!

And obviously talk to the mortgage company to avoid repossession or a forced/auction sale.

I know of no lenders who would lend on half a property, I think you'll find if this is the information provided by the Op, it is incorrect.

Or he signed her name, in which case he really needs to accept her offer to walk away for £50,000 because that’s criminal fraud.