My Mil Has Had A Interest Only Mortgage For The Last 15Yrs Approx

[twoboys]

she is 83, it was set up by another family member, its in her name, now the mortgage is only 10,000, she is very alert and has no memory probs, we have made an appointment to see her mortgage provider with her to try and pay off the mortgage, what i want to ask what would the best outcome, she has about 2000 that she could put to it and we can help with about £50 amonth plus she cld pay about £50 amonth, what would be our best options? we need to get her to write a will, she is wanting us to have the house when the time comes, sorry this is long winded! thanks for any input

[ToraToraTora]

10k? Don't pi55 about you could card surf that on 0%, put the 2k in by all means
.

[ubasses]

I think you are going to have to wait until you meet with the Mortgage Company. It is very unusual to be permitted to have a mortgage over 75. A lot will depend on when the end date for full repayment is, as things are they may be happy to receive the interest payment each month and have their Charge over the property to ensure they are paid off before any sale proceeds are paid out when the property is sold at death. However, they may insisit on it being repaid in full on the due date. One option would be to go to one of the Lifetime Equity release Companies for £10K and pay it off that way. Their interest rates are higher than a normal mortgage and again this bigger amount would be repaid from sale of property on death. Do you have a property you could release the money on, gift it to her to repay the mortgage, or even place a Charge on her property in case anything goes wrong and she does not leave it to you in her Will.
No doubt they will look at many options when you get there.

[Peter Pedant]

Your best option is to leave it as it is and get her to write a will

ubassis gives spot on advice and I think they (the mortgage co) may have 'forgotten' about her (MIL) in which case as soon as you say she is 83 - they may try to claim immediate replayment

If she needs are in the future then the mortgage cd be useful to offset the capital claim

If the heirs are you (A) and B and you (A) take over the mortgage effectively then on death the good news is your mortgage debt (ten thou or whatever) is paid off first and THEN the remainder is divvied up between A and B. Makes B spit blood - if you like pi55inig off your siblings

INteresting

[twoboys]

thankyou for both answers, its seems its not that simple then? lol we have our own house and a mortage for about 26, when the time comes we wld want to keep the property for our child and not to sell, we dont have a lot of money

[Peter Pedant]

o god
if she needs care

not if she needs air

[Peter Pedant]

oh yeah its simple
so long as you decide what you want
and then the way to do it - is straightforward

But what do you wanna do - minimise IHT - leave mortgage in place
pi55 off siblings - take over mortgage
make sure you get the house - make her write a will
(or ask your GP ! sorry stupid shipman joke on a hot day)
scre+ the govt care fees if she needs it - leave mortgage in place


It is not so much complicated as you have lots and lots of choices you lucky lucky fellow.

and remember that Windsor Woman said: you cannot be too rich or too thin

[SirOracle]

Twoboys. You say that your MIL has an interest only mortgage of £10,000. Are you absolutely sure of this,or do you mean she has a Capital and Interest repayment mortgage?

This makes a big difference to the circumstances.

[twoboys]

Thanks peter, your abbr confuse me(which is easy to do) lol we are in Scotland, she is willing to get a will made out so that we will inherit the house, which inturn we wld give to our child, just wait and see what mortgage ad says too, but all input appreciated, will keep you post thro time(dont think we will see M A for a couple of wks

[twoboys]

Sir yes just interest only, ex council purchase

[Hypognosis]

I thought the whole point of equity release schemes (*) was that these companies are taking a punt on whether the customer will die prematurely and they 'score' the entire value of the house?

I've heard horror stories along the lines of the surviving spouse being told they no longer own the property and given only a matter of days to move out.
I'd be glad to be told I'm wrong about this.

(*) A bank granting a mortgage to someone over state retirement age? Surely that's an equity release scheme, not a mortgage?

The only 'advice' I can offer is to tread carefully, ring up some other bank with a proposal to borrow money on a person of 70 (say) and that you're acting on their behalf. Is age 70 okay? Is doing it on their behalf okay? What if the person was 75? What about 80?

Are they more or less eager to proceed, the older the customer is?
Do the terms and conditions mean they take possession of the entire house, even if the amount loaned is only a fraction of its worth?

[ubasses]

For Hypnosis. The Mainstream banks do not do lifetime equity release and no they do not take the whole house. Different types one where the interest accrues for the rest of the borrowers life, both capital and interest paid off on death. Or borrow a percentage, get less than the real figure and pay back the percentage of increased value on death. Always use member of SHIP and ensure there is a guarantee against negative equity. Insurance Companies are one of the providers of these.

[Peter Pedant]

well we dont have all the info

7% which is not much will compund to double the capital sum in seven years. Fantastic if you are the one getting 7%

however if you borrow a capital sum - which may have happened here - and pay the interest - then it stays at 10k or whatever you have borrowed. I have heard this recommended - but what makes you think I wdnt recommend this myself ?

[Peter Pedant]

um Twoboys if you are gonna listen to one of us
I think it is obvious ubassses

[twoboys]

okay now very confused!

[Peter Pedant]

Ah in the lead up to the Boer war one of the Dutch said about the Lydenburg Republic (pop as many as 30), if you put 3 Boere together, you get three parties and five opinions

[Hypognosis]

Thanks for the tips, ubasses.

See? I spelled your name right!

Hypo = under[somethng], lower than, less than
Gnosis = knowledge

Hypnosis = to put someone in a trance.

Hypgnosis = Graphic Design company, founded by (the late) Storm Thurgeson (sp?)

Hypognosis = because "I don' t know enough"... hence I'm on AB.

:-)

[SirOracle]

Peter Pedant I don't think you are correct in saying that the capital will double in 7 years @ 7% compound per annum. I make it around £16000 which is still mind boggling.

[Hypognosis]

I make it 10 years @7% compound (monthly), to double, fwiw.

@twoboys,

I imagine the appointment with the provider will revolve around what the early payment penalty fee will be, how that varies with time (relative to the originally scheduled end date) and negotiating the revised end date and payment schedule with you. I'll take i as read that you're already familiar with what the 'administration fee' will be, over and above any penalty. (If not, it'll be in the leaflets sent with the annual statement).

One other factor to consider, which hadn't occured to me until now. If the property is likely to make her estate stray into Inheritence Tax territory, then I see every reason to leave the mortgage in place. She may well live long enough to pay it off in full, wherupon she could take out another one (unless the InhTax threshold has been revised upwards in a game-changing manner, by then). If not, the deduction off her estate by the mortgage provider will reduce any Inh tax payable.

Or, put another way, you'll need to discuss all this with an independant financial adviser and/or qualified accountant. I am neither, obviously. :-/

[EDDIE51]

She may be in good health now but if she ever needs to go into a care home the house will be used to pay the fees. You are only allowed to keep £23,500 the rest will be set against the house as an 'intrest' to be paid when the house is sold. You may want to get specialist advice as to the best way to minimise the financial cost if she does need care , with care home fees of £600 to £3000 a week it does not take long to see the value of a house vanish.
The charity AgeUK has a team of specialist advisers who can suggest legal ways to minimise the cost of care when people own a house.

[Peter Pedant]

Apolz gemmun, my compound interest calcs were off, but you get the idea

when I was posting - I thought I bet it is 10 at 7 and as one of you points out it is.
(it being the doubling time)

Eddie has highlighted the point that if there are care fees in view then an encumbered house is better to have than a mortgage free house - you end up paying less by the amount of the mmortgage

Hence my original statement - you decide what you wanna do and then the course of action is clear.