Soldato
- Joined
- 29 Dec 2009
- Posts
- 7,174
x
Last edited:
Mortgage Experts in here.
- Thread starter On Holiday
- Start date
They are generally correct. There is NO requirement for any lender to offer beyond the original date. They can remove the lending at any time they wish and ask for the outstanding amount to be repaid.
No mortgage lender will normally lend past the individuals retirement date due to affordability.
It's not what you are paying, or can pay just now, it's about the risk of non payment down the line.
Any lender looks at the risk....that's the number 1 factor.
Don't take this the wrong way please - Example being something happens, and your dad is unwell, DVLA takes his license away, ergo no driving job. His self employed earnings also suffer.
All he has is a state pension (assuming he has that) - £140 a week or so. If he had other personal or company pensions they may take that into account - otherwise a state pension won't cover the mortgage payments on £60k.
Without sound harsh - this is something that should have been reviewed WAY before hitting 66 years old. It's been left far too late to give him any options.
No mortgage lender will normally lend past the individuals retirement date due to affordability.
It's not what you are paying, or can pay just now, it's about the risk of non payment down the line.
Any lender looks at the risk....that's the number 1 factor.
Don't take this the wrong way please - Example being something happens, and your dad is unwell, DVLA takes his license away, ergo no driving job. His self employed earnings also suffer.
All he has is a state pension (assuming he has that) - £140 a week or so. If he had other personal or company pensions they may take that into account - otherwise a state pension won't cover the mortgage payments on £60k.
Without sound harsh - this is something that should have been reviewed WAY before hitting 66 years old. It's been left far too late to give him any options.
- Joined
- 29 Dec 2009
- Posts
- 7,174
x
Last edited:
Soldato
Do you mean he's reached the end of the mortgage term and not just the end of the current fixed rate?
How did he get to the end of the mortgage term with 60k still remaining? Is it an interest-only mortgage or endownment?
How did he get to the end of the mortgage term with 60k still remaining? Is it an interest-only mortgage or endownment?
This is what I was thinking. If it was an interest only arrangement then the money eventually needs to be paid back...
This.
A mortgage "term" is a very specific thing. So to get to the end of the mortgage term (which typically might be 20/30 years) with £60K remaining it must have been interest only either from the beginning (like 40 years ago and the house was bought for £60k) or transferred to interest only at some point to make it more "affordable" (which is the biggest misconception about interest only mortgages)
Or, it has just reached the end of the fixed rate "deal" and would normal being going to the standard variable rate (which I think is what is being suggested).
Hard position to be in regardless. Selling up other assets to pay it off OR you buying it off them would seem like that only course of action if lenders aren't entertaining the possibility of getting another mortgage.
Maybe worth looking at mortgages specifically aimed at over 60s? https://www.money.co.uk/mortgages/mortgages-for-over-65s.htm
I'd imagine that affordability calculations might be more lenient if they regularly have to deal with people who are more likely to be living off savings and pensions.
I'm not sure this will work, but thinking laterally:
Could he get an equity release mortgage? One where the intention is that at the end they take the owed money from the house when he leaves / dies?
The reason I suggest this is that of course they don't care so much about age / affordability, since they don't expect any repayments anyway. But if I remember rightly, you do have the option to repay and therefore remove their interest in the property if you wish.
Interest rates are higher, but it might be a solution to the issue?
Could he get an equity release mortgage? One where the intention is that at the end they take the owed money from the house when he leaves / dies?
The reason I suggest this is that of course they don't care so much about age / affordability, since they don't expect any repayments anyway. But if I remember rightly, you do have the option to repay and therefore remove their interest in the property if you wish.
Interest rates are higher, but it might be a solution to the issue?
equity release is effectively a lifetime mortgage - ergo, he has £60k already owning, taking more lending on the property will increase his borrowings - not repay them
Permabanned
I’m not sure how it could be considered a risk to the mortgage company. If he defaults they can just repossess the house which presumably is worth much more than the remaining balance of the mortgage.
Eh? He would take out an equity release for £60k, then use that money to pay off the remainder of his current mortgage.
What on Earth did you think I was suggesting he do with it?
Soldato
Surely you can only use equity release when you own the property?
edit: had a look and it looks like you don’t need to have paid off your mortgage.
To be clear - he take out £60k equity release on his house, on which he already owes 60k......
So he uses the 60k equity release to pay off the mortgage - He's then left with 60k owing on the equity release....It pays off the mortgage but it's a VERY expensive way of paying it off as he will either have to pay the monthly interest accruing on the equity release, Or leave the interest accuring for the rest of his lifetime, thus costing him/his estate a huge amount more.
So he's just effectively shifting the 60k mortgage debt to a different type of debt....
Costs are around £1500 to £3k to setup, borrowing £60k is a lot of money on Equity release and a last resort. NOT for the faint hearted as the interest accrual is mental.
Example being
Soldato
Tax efficient accountants eh?
No sympathy, tell him to start declaring some income to HMRC, he won't get anywhere otherwise.
You can't have your cake and eat it anymore.
No sympathy, tell him to start declaring some income to HMRC, he won't get anywhere otherwise.
You can't have your cake and eat it anymore.
you pay an accountant to help your business or yourself be tax efficient....what's your point?
no one said anything about undeclared income....
Soldato
- Joined
- 19 Oct 2008
- Posts
- 5,950
Stating the obvious, £60k is a lot to owe at age 66 on a house. There are plenty of risks a lender sees and they really do not want to repossess properties.
The easiest option is probably for your dad to just continue with the current lender at a higher interest rate (the default rate once the fixed rate term is over) but save hard to get it paid off ASAP. Re-mortgaging always has costs involved too, or a higher APR if it's free. I'm personally not a fan of the obsession with offering limited time fixed low rate mortgages - it's something I reckon the government should have clamped down on. Lose your job or whatever so you cannot get a new deal, or in your dads case, be unable to easily get another good deal due to age etc and you can end up stuck in the mortgage at 5%+ APR. With the interest rate at 0.5% still, it's ridiculous that lenders are getting away with 5%+ once the intial sweet deal ends. An alternative competitive lifetime (of the loan) rate should be an alternative.
Sounds like your dad could also be hit with IR35 next year, as a self-employed driver working on contract for a company (no tax efficiency then), something to think about too. HMRC are clamping down on what they consider disguised employees. Then probably 25%+ of "profit" suddenly vanishes (it's hit my industry too). So this is another reason for him to save hard and get it paid down ASAP.
Maybe the lender can offer an offset mortgage when the deal ends? That's what mine did on a BTL. Pump all spare cash into it until the balance offsets the mortgage then pay it off. As the balance builds it also reduces the interest £ to be paid (if they offer that option) or will reduce the amount needed to pay it off at the end (the interest £ saved is deducted from the final balance). Or if an offset cannot be done then simply make overpayments or pay additional lump sums to bring the amount down.
The easiest option is probably for your dad to just continue with the current lender at a higher interest rate (the default rate once the fixed rate term is over) but save hard to get it paid off ASAP. Re-mortgaging always has costs involved too, or a higher APR if it's free. I'm personally not a fan of the obsession with offering limited time fixed low rate mortgages - it's something I reckon the government should have clamped down on. Lose your job or whatever so you cannot get a new deal, or in your dads case, be unable to easily get another good deal due to age etc and you can end up stuck in the mortgage at 5%+ APR. With the interest rate at 0.5% still, it's ridiculous that lenders are getting away with 5%+ once the intial sweet deal ends. An alternative competitive lifetime (of the loan) rate should be an alternative.
Sounds like your dad could also be hit with IR35 next year, as a self-employed driver working on contract for a company (no tax efficiency then), something to think about too. HMRC are clamping down on what they consider disguised employees. Then probably 25%+ of "profit" suddenly vanishes (it's hit my industry too). So this is another reason for him to save hard and get it paid down ASAP.
Maybe the lender can offer an offset mortgage when the deal ends? That's what mine did on a BTL. Pump all spare cash into it until the balance offsets the mortgage then pay it off. As the balance builds it also reduces the interest £ to be paid (if they offer that option) or will reduce the amount needed to pay it off at the end (the interest £ saved is deducted from the final balance). Or if an offset cannot be done then simply make overpayments or pay additional lump sums to bring the amount down.
Last edited:
Yes. So that's exactly what I said then. He's shifting the debt to something which is more expensive - but has the advantage that he can shift the debt there.
Also, you tend to get a better deal on them if the amount you want from them is significantly less than the value of the house. On the other hand, the younger you are, the less they will loan / higher the interest rate. He'd also have to specifically aim for one which has good early repayment allowances.
I didn't say it was an ideal solution. But it might well be better than selling a load of stuff he actually still needs for his business. And it might, even as an expensive mortgage, still be cheaper than a very large load not secured on a house.
Associate
If you sell the business assets and clear off the mortgage this will then free up £1000 -£1500 reducing the need to work as much. Then do more HGV driving during the year but less during the week. Other option is just sell up and move into a property that he can buy outright.
I he needs to pick the business or the house. I don't think he can have both.
I he needs to pick the business or the house. I don't think he can have both.
Quite, I am currently pursuing a claim against a financial advice company for suggesting my grandparents took out equity release 20 years ago. The debt is now over 100k on an original 20k release. They didnt "need" to take the money but the way it was presented to them was very misleading as to the risks and so far all the noises the ombudsman has been making agrees with us.
ER should be an absolute last resort and frankly the predatory terms should be much more tightly regulated.
Last edited: