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"can We Get A Mortgage To Clear Our Debts?"

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Can we get a mortgage to clear our debts?

I am 66 and my wife is 60 and we both receive retirement pensions. We have credit card debts of £15,000 and are paying back just over the minimum amount of £395 monthly.

Is the best option for us to get a mortgage on our house for 25% of its value so we can pay off these cards and have some left over? Chris, Bournemouth

A: Louise Cuming, head of mortgage and protection services at Moneysupermarket.com, replies: The best solution really depends on your income and how much you can afford each month and the type of credit cards you have.

If you have any of your credit card balances on an interest-free basis, then the most cost effective solution is to pay as much as you can off that card each month to take advantage of the interest-free period.

If you are looking at a mortgage solution, you have two choices. An equity release 'lifetime mortgage' which allows you to release money from your property and you do not pay it back.

The interest simply rolls up and you repay the debt when your property is sold. Your home would need to be worth a minimum of about £100,000 and you could release up to 20% of its value.

The other option is a conventional mortgage. The issue will be the maximum term based on your age and obviously a shorter term will mean a higher repayment. On the other hand, the longer the term, the more interest you will pay.

Lenders vary as to the maximum age they will consider. For example, Nationwide, Lloyds and Alliance & Leicester quote a maximum age at the end of the mortgage of 75, Abbey quote 85 and Halifax and HSBC do not publish a maximum age, instead saying they will consider each application individually.

For both options I suggest taking advice from a mortgage consultant so you can decide exactly the right solution for your circumstances.

Just what exactly are retirees on pensions doing with £15k of unsecured debt? Is this the norm across the UK?

House prices are going to continue to drop for years to come, and stagnate for who knows how long. Equity withdrawal will start to become a very expensive and risky option for these people, but they really have so few choices.

If this is a widespread as I suspect it is, things are looking pretty rotten for the generation following and future in general.

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A mainstream bank allows an 85-year-old to have a mortgage! :blink::blink:

Yes it is mad. My recently retired uncle took out a big IO mortgage in '06. Granted he has a teachers pension, but still, I don't know what he was thinking because it left not much for food and bills after the monthly interest payment.

Banks ARE the moral hazard in the UK.

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not typical at all. They could easily clear the 15K with an equity release 'lifetime mortgage' - no interest to be paid as it would come off the end value of the house - tough for those hoping to inherit though. ;)

Edited by olliegog

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They have substantial collateral. Why on earth would a bank refuse?

Quite. Debt. What housing was invented for.

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They have substantial collateral. Why on earth would a bank refuse?

Do you know anything about business?

Your right, business has no compassion, so why should it refuse, it would be so silly of them... they are greedy and want to place the whole population of all ages into a modern day servitude..

Go banks. ra ra ra

Edited by tiggerthetiger

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It's funny that the advisor's answer doesn't contain the obvious solution.

Sell the house and downsize. That way they could 'release' the equity without spending the rest of their lives paying interest on it.

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It's funny that the advisor's answer doesn't contain the obvious solution.

Sell the house and downsize. That way they could 'release' the equity without spending the rest of their lives paying interest on it.

Unfortunately most people see property as an extension of their metaphysical being, but you are correct. They should sell and clear away all the outstanding debt. It is the most economically sound decision.

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It's funny that the advisor's answer doesn't contain the obvious solution.

Sell the house and downsize. That way they could 'release' the equity without spending the rest of their lives paying interest on it.

But, but, but, it's value is going to go up!

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A mainstream bank allows an 85-year-old to have a mortgage! :blink::blink:

I don't think this is an issue.

As long as they will have repaid it by this time then why not?!

As long as they can get life cover to swallow the cost or if not the property is worth more at resale rhanthe outstanding why does it matter?

Not that it's a good idea to be in debt fullstop mind you!

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