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

You need to do whatever it takes to put the house on the market ASAP.

Tell your dad it needs to be done your way or he'll end up living in a tent on the streets.

Your mum would be extremely foolish to make a fuss that would delay a sale. If the bank repossesses it and sells it as a repo because she holds up a sale, she stands to get much less than if she bides her time and lets the property go to market and sell to the highest offer.

Get your dad to agree to POA for you. He needs someone on his side who has their head screwed on and who is willing to take the reins, not bury their head in the sand.

This is the fallout from predatory lending, a shocking state of affairs.

Be prepared to get your dad's MP involved if the bank gives you grief.

A solicitor should be consulted as a matter of urgency.

Good luck.

Also, @Pinkclouds80, you need to get a hold of the divorce decree and read it carefully.

They didn't "lend on half the property" and I didn't say that either.

But I suspect there is something missing from the OP.

This is what you said -

"Not half the equity after the father mortgaged in his own name only."

This is not possible. You cannot mortgage a property held at the Land Registry by two people, in just one of the owners names, both names are required on the mortgage deed otherwise it would be unenforceable. Lenders simply cannot do this.

I'd do this too. Priced right, a builder will buy it to do up. Can you look for a flat for over 55s? We are also in a pricey area but much more reasonably priced retirement flats do come up often. It would be good for him to be debt free and also have a much more manageable place to live.

A fine example of why interest only mortgages should be banned.

Which is why the only 3 options seem to be:

1. the OP’s mother has signed off on the loan
2. the building society has seriously screwed up and not noticed her father doesn’t own the whole property
3. the OP’s father has forged his ex-wife’s signature.

Based on what the OP says, 1 is unlikely. I hope it’s 2 but I strongly suspect it’s 3. In which case he may be in serious legal trouble. I think as a starting point, the OP needs to see the loan documents and check if her DM has signed (or ‘signed’) them.

Strongly recommend getting power of attorney for health & wealth set up for your parents

You get it signed & set up

You use it in the future when it is needed

Note
You cannot set this up once capacity has been lost. It has to be set up before

Fill out forms & do it yourself

https://www.gov.uk/power-of-attorney

Good luck

Not really. Nearly all buy to let mortgages are interest only. They do suit a minority of ordinary borrowers, just because borrowers are stupid and don't put a vehicle in place to pay the capital sum, it doesn't mean the rest of us should have our choice limited.

BTL with interest only mortgages should be banned too.

No that’s not what happens. Bank has first charge on the house. Proceeds of sale after the sale.

If that was true a bank could register a charge against every property in the country and demand money.

The person has to be a party to the contract to be made pay the debt.

And my crappy english did not help 😬

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

DF thinks he took out the loan on his own in 2011 and DM thinks she owned a share since 1998.

A house loan is the same as a loan you take out for your hoilday with an extra clause which said you promise you will give your property (to the value of the unpaid anount) if you dont give the bank the cash. If you dont own the property you cant give it away (that would be like you stealing NDNs car to pay for the loan) So you owe the money and the bank have an promise which has no econimic value

> how the loan was arraged will be key so the OP needs to get all the documents off the bank

This thread is actually a bit bonkers. OP, you clearly need some financial advice from a real person, because you are getting all manner of conflicting nonsense posted currently.

How purile . . .

If the house was in negative equity at the point at which they divorced, then I don't think he owes her anything! All the equity has been built after their divorce. It can't be right morally for your mum to try and take half of that equity?

Get some legal advice about yourmother's interest in the house.Sell the house the house now before it is repossessed and sold at a knock down price and swingeing charges and fees made against it. Use the residual equity of large enough to buy a much smaller property or else rent an Over 55's flat until your father's capital runs down and he can claim some housing benefit top up. Equity Release id a really bad deal, so avoid ( also your motehr would perhaps need to agree to it too as a co owner). Check the land registry deeds - costs £3.50 to see who's name is on the property.

The way the courts see it is that it isn’t morally right that the spouse who lives in the house hasn’t paid any rent to the non-resident owner despite all the issues they face as a result of not being bought out so said non-resident owner gets their share of the equity in lieu of rent.

It’s a fairly well established legal rule.