Interest only mortgage expiring in 3 years - options?!

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AMDunn

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Hi folks, my partner and I live in her house which I've only recently discovered is on an interest-only mortgage that expires in three years or so. She's apparently been kicking the can down the road for a long time!

We're both post divorce and neither of us came out of our divorces in terribly good financial stead. So I'm wondering what are her (our) options? We're both almost 60 and Pepper Finance will want €185,000 from her quite soon (the property is worth about €380-400k based on others that have sold in the same estate).

Obviously we want to continue living here so I'm wondering are there mortgage-type products out there that would for example pay off upon death? My partner isn't concerned about leaving a house behind in her will - so really I'm thinking she needs a product that allows her kick the can so far down the road she won't live to see it...

I'd appreciate any ideas you may have on this!
 
Are you both working? What are your retirement plans?

A regular mortgage can run until you are 70 if you have the income to support it, 185k over 10 year term could be €1,800 per month.
 
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Was this originally with BOS Ireland.

What happens if you don't pay in 3 years ?

When the lumps is demanded, if you write back and say, unfortunately I am not in a position to pay. My understanding is that the interest continues unchanged. Not very satisfactory but perhaps not the worst either.
 
Thanks Corola - We're both working but not in a position to pay a 10 year mortgage at that rate. We spoke to broker and assuming we'd actually get approval, the repayments were over €1900 pcm at current rates. We could manage it until retirement but after 65 we'd be in serious difficulties.
Thanks also Cremeegg - I had thought that simply continuing might be a possibility but I can't get a straight answer from Pepper on it! As you imply maybe their hand needs to be forced before offering that as a solution. Their current position is "fill out this standard financial statement and let us rake over your accounts but we want our money either way"
 
Thanks Dr S, our lump sums will be modest enough unfortunately so we're looking to kick the can down the road. Ideally a lifetime mortgage that was paid on death would suit us (not too worried about inheritance etc). However there doesn't seem to be any provider in the market that will lend that much based on the house value. I think 19% is our max from an outfit called Spry.
 
AMDunn said:
Thanks Dr S, our lump sums will be modest enough unfortunately so we're looking to kick the can down the road. Ideally a lifetime mortgage that was paid on death would suit us (not too worried about inheritance etc). However there doesn't seem to be any provider in the market that will lend that much based on the house value. I think 19% is our max from an outfit called Spry.
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arent those loans more for houses that are owned outright?
 
AMDunn said:
so we're looking to kick the can down the road.
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Some cans can't be kicked far enough down the road. I think you both need to face reality and deal with the situation sooner rather than later.

From looking at Spry, your partner could borrow €72k at 63 based on the €400k valuation. So how likely is it that she can clear €103k from the principal in the next 3-4 years?

If that is not feasible, then you really need to start communicating with Pepper to properly understand what options they can provide. And if this is something you can't do yourself then you need to speak with someone like Mabs who can support you. But either way, you need to act now to solve the problem.

I think understanding the consequences may help spur you into action. You may ultimately be forced to sell or you may spend years in a legal battle that can be draining.

Even for yourself personally, you need to be careful how you deal with the situation. Each to their own but because you are both divorcee's, you've probably kept your finances separate. If you were to help clear the principal owed and your partner passed away before you, you would be left very vulnerable. Either Spry or Pepper would force the sale leaving you with no cash or a place to live. So if you are to do this, it should be documented as a loan between you to protect your own interests

Kicking the can down the road should not be an option for either of you, you really need to start dealing with it now
 
I would suggest, start paying interest and principle now until you both retire. Say that €1900 a month
The maximise both your lump sums to pay a chunk off when you retire. You may get the balance down to €20-30K
Get a credit union loan for the balance.
Put the house in both your names.
So once retired the bulk is paid off you might have a credit union loan but you own the roof over your head. You will have a smaller pension but no rent or mortgage to pay.

Otherwise drag it through the courts for years and years, get evicted, maybe end up homeless or end up renting a substandard place.

Pick which scenario suits your situation best.
 
Clamball has the best strategy.

You don't tell us what savings and investments you have.
Pay those off the mortgage now.
Over the next three years pay down whatever you can off the capital.

Pepper will not force the sale of your house while you are paying interest and reducing the capital.

When the capital is due to be repaid, you can have a chat with them then about the various options. They are likely to take no action nor to give you any special arrangement.

When the lump-sums come in from your pensions, pay them off the capital as well.

Rinse and repeat.

One of you might come into an inheritance. One of you might be able to borrow from the family. One of you might be able to get a Credit Union loan.

A competitor might enter the lifetime mortgage market and give you more than Spry.

But whatever the eventual outcome is, it will be much easier to sort it out the lower the mortgage owing is, so get cracking on reducing the capital.

Brendan
 
Clamball said:
Put the house in both your names.
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Not sure about that. But on the other hand, don't go paying down her mortgage without a clear understanding of what you have agreed.

Are you paying rent for example? Or if you give her €50k from your pension, it should be a loan rather than a gift.

It's not very romantic, but put it in writing.

Brendan
 
Firstly you need to determine how you are handling your finances as a couple eg would you both consider moving forward with a joint mortgage?
Or are you keeping them separate?
If combining, you would need to put safeguards in place if you plan to not marry.

You also need to consider what your own living situation would look like under different scenarios.

what could your partner pay monthly towards principal from now? Are you contributing rent that could also be ringfenced by your partner to pay towards principal.
Can you look at rent a room?
All that could add up quite quickly
For example: partner pays 500 pm , you contribute 800 pm towards costs and your partner uses that for mortgage, rent a room of 800pm... That's 25k per annum.
Are there any savings that could be used?
You both need to deal with this and it may be possible to get ahead on this. As mentioned above once the lump sum payment is due, you could take out a small loan to cover it.

I wouldnt want to be facing into my 60s with Pepper breathing down my neck or putting my home at risk.

Pay as much as you can now, it will provide options. While you want to stay in that house now, you may want to downsize in few years.
Think things through and take action rather than ignoring the issue and it will only grow.
 
dubdub123 said:
I wouldnt want to be facing into my 60s with Pepper breathing down my neck or putting my home at risk.
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From the few cases I have come across, Pepper has not been breathing down people's necks after the mortgage term expires.

They don't do anything. They don't reach an agreement. They don't insist on the sale of the property.

They just collect the interest.

I would not rely on this to continue. And, personally, I would not like to live with the uncertainty of this. So the correct strategy is to repay as much of the capital as possible.

However, while people should repay as much of the capital as possible, they should not panic that they are going to be homeless in three years when the mortgage term expires.

Brendan
 
This to me is a frightening situation. To be heading into my 60's with a question mark over where I will live is scary.

I'm assuming if you have just found out that it is an interest only mortgage, you may not be together all that long. I would certainly be looking at how steady and sturdy the relationship is before becoming involved in solving this issue by adding my own money to it.

Would it be possible to sell, repay loan and buy an apartment together with the balance and possibly a small loan? I would prefer to be in a small one bedroom apartment that was jointly and legally mine, than invest in a house that might go at any minute.
 
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