Mortgage in Your 60s
Discussion
Asking for a friend,...... really.
Aged 63, for reasons I won't bore you with, very little money behind him. Lowish paid job, say £25K ish. Currently living rent free with elderly dad in small North London flat, value £300K ish. This arrangement suits him , he looks after his dad and lives rent free. Suits dad, has company and is well looked after. Suits his sister, she knows her dad is happy and she loves her brother. All is good now.
So, dad will die, probably sooner rather than later. Sister not wealthy enough to allow her brother to carry on living in the flat, she'll need her £150K share out.
Ideally, he'd like an interest only mortgage when his dad dies, for £150K, to give his sister to buy her our, so a 50% LTV. Ongoing for ever, until he dies. Then the flat is sold, bank get their £150K capital back, his kids share the remaining share of the sale price.
Is it doable. If so, who would do it?
Aged 63, for reasons I won't bore you with, very little money behind him. Lowish paid job, say £25K ish. Currently living rent free with elderly dad in small North London flat, value £300K ish. This arrangement suits him , he looks after his dad and lives rent free. Suits dad, has company and is well looked after. Suits his sister, she knows her dad is happy and she loves her brother. All is good now.
So, dad will die, probably sooner rather than later. Sister not wealthy enough to allow her brother to carry on living in the flat, she'll need her £150K share out.
Ideally, he'd like an interest only mortgage when his dad dies, for £150K, to give his sister to buy her our, so a 50% LTV. Ongoing for ever, until he dies. Then the flat is sold, bank get their £150K capital back, his kids share the remaining share of the sale price.
Is it doable. If so, who would do it?
I’ve no direct experience but it’s a lifetime mortgage your mate wants. Have a Google for some general info and then find a broker who can deal with them. There’s a few different options and I’m not sure if they cover buying a property but hopefully there’s something that works for your mate.
To the best of my knowledge (which is limited to personal research for a similar requirement), there are two types of product to consider:
1. Retirement Interest Only Mortgage - will need to pass the affordability test, which I suspect will be a challenge. He will need to show that he has / will have sufficient pension income to afford the interest payments, based on whatever criteria the lender sets.
2. Equity Release - no affordability test, but will not provide 50% LTV (probably somewhere between 22.5% & 30%). He can either pay the interest to keep the balance constant, or let the interest roll up. The LTV % available may increase with age, but that's just something I've thought seems logical rather than something I've got any facts about.
1. Retirement Interest Only Mortgage - will need to pass the affordability test, which I suspect will be a challenge. He will need to show that he has / will have sufficient pension income to afford the interest payments, based on whatever criteria the lender sets.
2. Equity Release - no affordability test, but will not provide 50% LTV (probably somewhere between 22.5% & 30%). He can either pay the interest to keep the balance constant, or let the interest roll up. The LTV % available may increase with age, but that's just something I've thought seems logical rather than something I've got any facts about.
In the absence of an expert posting, which I'm not, I think your friend might struggle.
This will require a normal mortgage, not equity release or lifetime mortgage as they are for releasing capital from an existing home, not buying a home.
You friend wants to get a mortgage roughly 6 times his salary and interest-only with no repayment plan in place other than repaying it when he dies.
Planning for someone's death is prudent but it sounds like you friend's future beyond his father's death is dependent on a number of assumptions such as the contents of the will, the price of the property, the relationship with his sister, the value of the estate, his continued employment and of course, his ability to get a mortgage.
This will require a normal mortgage, not equity release or lifetime mortgage as they are for releasing capital from an existing home, not buying a home.
You friend wants to get a mortgage roughly 6 times his salary and interest-only with no repayment plan in place other than repaying it when he dies.
Planning for someone's death is prudent but it sounds like you friend's future beyond his father's death is dependent on a number of assumptions such as the contents of the will, the price of the property, the relationship with his sister, the value of the estate, his continued employment and of course, his ability to get a mortgage.
What about him buying a B2L now and over the course of his dads remaining life there may well be decent capital growth.
This could carry on even when he is retired and at the point of his fathers passing (or sooner) he could sell up pay cgt and then have a decent slug of cash to “buy” the sister out. Therefore a smaller mortgage.
This could carry on even when he is retired and at the point of his fathers passing (or sooner) he could sell up pay cgt and then have a decent slug of cash to “buy” the sister out. Therefore a smaller mortgage.
Welshbeef said:
What about him buying a B2L now and over the course of his dads remaining life there may well be decent capital growth.
This could carry on even when he is retired and at the point of his fathers passing (or sooner) he could sell up pay cgt and then have a decent slug of cash to “buy” the sister out. Therefore a smaller mortgage.
(1) He doesn't have the money to buy a house. At all. That's sort of the point of the thread.This could carry on even when he is retired and at the point of his fathers passing (or sooner) he could sell up pay cgt and then have a decent slug of cash to “buy” the sister out. Therefore a smaller mortgage.
(2) He is 63. It's reasonable to assume that the time his dad has left isn't enough for house price growth to solve all this problems.
(3) This is sort of a repetition of point (1), but do you not see the logical inconsistency in saying "buy a house now, then later you can sell it and have enough money to buy a house".
LeoSayer said:
In the absence of an expert posting, which I'm not, I think your friend might struggle.
This will require a normal mortgage, not equity release or lifetime mortgage as they are for releasing capital from an existing home, not buying a home.
You friend wants to get a mortgage roughly 6 times his salary and interest-only with no repayment plan in place other than repaying it when he dies.
Planning for someone's death is prudent but it sounds like you friend's future beyond his father's death is dependent on a number of assumptions such as the contents of the will, the price of the property, the relationship with his sister, the value of the estate, his continued employment and of course, his ability to get a mortgage.
This, most lenders will only lend you money until you are 70, so essentially they will only give him a seven year mortgage. This means he needs to borrow six times his salary over a period of seven years.This will require a normal mortgage, not equity release or lifetime mortgage as they are for releasing capital from an existing home, not buying a home.
You friend wants to get a mortgage roughly 6 times his salary and interest-only with no repayment plan in place other than repaying it when he dies.
Planning for someone's death is prudent but it sounds like you friend's future beyond his father's death is dependent on a number of assumptions such as the contents of the will, the price of the property, the relationship with his sister, the value of the estate, his continued employment and of course, his ability to get a mortgage.
Having done some quick calculation with Barclays on a repayment mortgage for £150K over 7 years on a 0.85% tracker the repayments are going to be £1840 a month
As £25K a year is a take home of £1,721.84 a month, I think he has zero chance of getting a mortgage.
I can't see this happening at all. He's already 63, when is he planning on retiring?
He would be better off waiting until the father dies then either coming to an arrangement with the sister to pay her an agreeable 'rent' for her half of the property, or doing what loads of other people do: sell up, split the profits and move somewhere cheaper, either buying or renting.
He would be better off waiting until the father dies then either coming to an arrangement with the sister to pay her an agreeable 'rent' for her half of the property, or doing what loads of other people do: sell up, split the profits and move somewhere cheaper, either buying or renting.
PurpleTurtle said:
He would be better off waiting until the father dies then either coming to an arrangement with the sister to pay her an agreeable 'rent' for her half of the property.
I guess ultimately that depends on how much the sister needs the money and his relationship with her. In my experience, the children have had the house valued and listed for sale as soon as the parent is in the ground.Given he will inherit £150k - based on assumed property value - is he able to buy a property for £150k all in (or less) in the area he wants to live?
Would he consider moving to a cheaper area and maybe buying for even less giving him some savings to live off in addition to state pension + any other pensions he may have.
Would he consider moving to a cheaper area and maybe buying for even less giving him some savings to live off in addition to state pension + any other pensions he may have.
Joey Deacon said:
I guess ultimately that depends on how much the sister needs the money and his relationship with her. In my experience, the children have had the house valued and listed for sale as soon as the parent is in the ground.
What else do you expect people to do? Is there some kind of "respect period" in which you're required to maintain an empty house as a monument to the departed, before you're allowed to sell it?I'd say PurpleTurtle has this one right. Sell on the passing of the father, and take the £150k somewhere that it buys an acceptable home.
Edited by Bannock on Tuesday 14th December 13:30
PurpleTurtle said:
I can't see this happening at all. He's already 63, when is he planning on retiring?
He would be better off waiting until the father dies then either coming to an arrangement with the sister to pay her an agreeable 'rent' for her half of the property, or doing what loads of other people do: sell up, split the profits and move somewhere cheaper, either buying or renting.
Or, he (or maybe even they - him and his sister) could do equity release for £75K which the sister keeps all of, and he then agrees a rent for the other £75K - assuming £300k net valuationHe would be better off waiting until the father dies then either coming to an arrangement with the sister to pay her an agreeable 'rent' for her half of the property, or doing what loads of other people do: sell up, split the profits and move somewhere cheaper, either buying or renting.
TwigtheWonderkid said:
Asking for a friend,...... really.
Aged 63, for reasons I won't bore you with, very little money behind him. Lowish paid job, say £25K ish. Currently living rent free with elderly dad in small North London flat, value £300K ish. This arrangement suits him , he looks after his dad and lives rent free. Suits dad, has company and is well looked after. Suits his sister, she knows her dad is happy and she loves her brother. All is good now.
So, dad will die, probably sooner rather than later. Sister not wealthy enough to allow her brother to carry on living in the flat, she'll need her £150K share out.
Ideally, he'd like an interest only mortgage when his dad dies, for £150K, to give his sister to buy her our, so a 50% LTV. Ongoing for ever, until he dies. Then the flat is sold, bank get their £150K capital back, his kids share the remaining share of the sale price.
Is it doable. If so, who would do it?
It appears doable https://www.legalandgeneral.com/retirement/retirem...Aged 63, for reasons I won't bore you with, very little money behind him. Lowish paid job, say £25K ish. Currently living rent free with elderly dad in small North London flat, value £300K ish. This arrangement suits him , he looks after his dad and lives rent free. Suits dad, has company and is well looked after. Suits his sister, she knows her dad is happy and she loves her brother. All is good now.
So, dad will die, probably sooner rather than later. Sister not wealthy enough to allow her brother to carry on living in the flat, she'll need her £150K share out.
Ideally, he'd like an interest only mortgage when his dad dies, for £150K, to give his sister to buy her our, so a 50% LTV. Ongoing for ever, until he dies. Then the flat is sold, bank get their £150K capital back, his kids share the remaining share of the sale price.
Is it doable. If so, who would do it?
Interest only so affordable. Only issue I can see is how long does your pal want to stay working and how will be fund £500 a month(ash) when he's 70+
Burwood said:
TwigtheWonderkid said:
Asking for a friend,...... really.
Aged 63, for reasons I won't bore you with, very little money behind him. Lowish paid job, say £25K ish. Currently living rent free with elderly dad in small North London flat, value £300K ish. This arrangement suits him , he looks after his dad and lives rent free. Suits dad, has company and is well looked after. Suits his sister, she knows her dad is happy and she loves her brother. All is good now.
So, dad will die, probably sooner rather than later. Sister not wealthy enough to allow her brother to carry on living in the flat, she'll need her £150K share out.
Ideally, he'd like an interest only mortgage when his dad dies, for £150K, to give his sister to buy her our, so a 50% LTV. Ongoing for ever, until he dies. Then the flat is sold, bank get their £150K capital back, his kids share the remaining share of the sale price.
Is it doable. If so, who would do it?
It appears doable https://www.legalandgeneral.com/retirement/retirem...Aged 63, for reasons I won't bore you with, very little money behind him. Lowish paid job, say £25K ish. Currently living rent free with elderly dad in small North London flat, value £300K ish. This arrangement suits him , he looks after his dad and lives rent free. Suits dad, has company and is well looked after. Suits his sister, she knows her dad is happy and she loves her brother. All is good now.
So, dad will die, probably sooner rather than later. Sister not wealthy enough to allow her brother to carry on living in the flat, she'll need her £150K share out.
Ideally, he'd like an interest only mortgage when his dad dies, for £150K, to give his sister to buy her our, so a 50% LTV. Ongoing for ever, until he dies. Then the flat is sold, bank get their £150K capital back, his kids share the remaining share of the sale price.
Is it doable. If so, who would do it?
Interest only so affordable. Only issue I can see is how long does your pal want to stay working and how will be fund £500 a month(ash) when he's 70+
Many thanks.
rfisher said:
Thank him after you have found out what the cumulative moooooohasive interest rate is and the penalty for daring to consider early repayment or selling the property.
Why would there be a cumulative interest rate? Let's say they set the rate at 4%, which is on the high side. That's £500/month on £150K. Try renting a flat in N.London for £500/month. He's very unlikely to be in a position to consider early repayment and will probably die in the flat, and never want to sell. It's close to all his family and friends, in an area he's lived in his entire life. When he dies, flat is sold, mortgage co get their £150K back and his kids split the difference.
Seems like the ideal solution.
rfisher said:
Thank him after you have found out what the cumulative moooooohasive interest rate is and the penalty for daring to consider early repayment or selling the property.
This is not the case with RIO mortgages - clue is in the title (interest only). Because you pay interest current in cash there is no roll-up like you get with equity release. The point about early repayment charges is potentially fair, although I don't know what market standard practice is.Gassing Station | Finance | Top of Page | What's New | My Stuff