Lifetime Mortgages At Last

[ingermany]

Daily Mail today. Lifetime IO mortgage being offered from next year. Initially just to the 2.3 million retirees with average 73k shortfalls currently on expiring IO terms. An alternative to repossession. Banks will defer repo until after death.

1. How on earth did the banks and regulators allow these loans in the first place? Apart from the fact that they had to do it to create the bubble and the feel good factor.

2. The regulators will do anything to avoid spooking the housing market by allowing repossession from those who can't afford to pay mortgage.

3. This is a very attractive deal. Rent fixed at 4% of the 1990 purchase price. That's about £150 a month for a 3 bed semi. Get a lodger, and you're sorted.

4. This is just another squalid bail-out.

5. This could be a future mis-selling time bomb when these properties come to probate.

[spyguy]

http://www.dailymail.co.uk/news/article-2811949/The-lifetime-mortgage-Banks-let-pay-die-house.html

'Older homeowners with interest-only mortgages could be told by their banks to take out a lifetime loan or move out of their property.

People in their 50s and 60s who cannot pay off their debt at the end of a typical 25-year interest-only mortgage may be offered a loan which they will take to their grave, to avoid repossession.'

'The property would then be sold and most of the proceeds would go to the lender. Spanish bank Santander will reportedly offer ‘lifetime mortgages’ to customers from next year in a bid to tackle the number of older homeowners who will never afford to repay their home loan.'

Lots of Ifs, mays, and later in this.

If a bank has been stupid enough to give a 25 IO mortgage to a 60 year old then it is pretty much a life time mortgage.

What's in it for the bank?

From now on. most are going to struggle to raise capital.

Are they really going to waste precious capital on exteninding a cheap loan to an old person that 'may' get their money back some 20 odd years down the line? Probably not.

As its Santander you can guarantee the deal will scr.w both the customer then explode in its own face.

[frozen_out]

The clue is on the name: MORTgage.

[Stu007]

I wouldn't mind a lifetime io mortgage at zero %, where do I apply?

[Snugglybear]

Lifetime mortgages are nothing new. That's what equity release schemes are.

This is the variety with interest repayment rather than those where the interest is rolled up to to be paid on death or the sale of the property.

[winkie]

Lifetime mortgages are nothing new. That's what equity release schemes are.

This is the variety with interest repayment rather than those where the interest is rolled up to to be paid on death or the sale of the property.

The difference is the cost....do you save by repaying so spending less, or spend or save more in different places now to repay later......equity withdrawal is both expensive and restrictive.

[Wurzel Of Highbridge]

3. This is a very attractive deal. Rent fixed at 4% of the 1990 purchase price. That's about £150 a month for a 3 bed semi. Get a lodger, and you're sorted.

The bank will make a fortune selling these to a shell company at a large profit, they will also charge huge estate agent fees through the shell company, repossession fees, interest and drag out the process.

The devil will be in the detail of the contract belonging to dead person on the mortgage title.

[Bloo Loo]

might, could, may, perhaps, possibly.

Speculation at best.

[gf3]

I am all for it. Much better to live rich die poor than the other way around. I pay my mortgage off when I am 65 that's if I live that long. What a waste of money. So it will have cost me £96,000 just to have a few years mortgage free. would rather spend that £96,000 enjoying my self whilst I am alive.

[Snugglybear]

The difference is the cost....do you save by repaying so spending less, or spend or save more in different places now to repay later......equity withdrawal is both expensive and restrictive.

In the case of people who have IO mortgages when they retire, I would think the attraction is staying in the property, with security of tenure, rather than selling up repaying the capital sum and spending whatever equity is left on insecure private rentals.

I shouldn't think they'd look any further than that.

Either way they might well not have anything to leave when they die, so their heirs (if any) probably won't be bothered either.

[winkie]

In the case of people who have IO mortgages when they retire, I would think the attraction is staying in the property, with security of tenure, rather than selling up repaying the capital sum and spending whatever equity is left on insecure private rentals.

I shouldn't think they'd look any further than that.

Either way they might well not have anything to leave when they die, so their heirs (if any) probably won't be bothered either.

So the lifetime mortgage morphs into the intergenerational mortgage...to keep it in the family....or get a lodger to pay the interest till death.

[Snugglybear]

So the lifetime mortgage morphs into the intergenerational mortgage...to keep it in the family....or get a lodger to pay the interest till death.

I don't know about intergenerational mortgages. It'd be more like the situation when properties have to be sold to pay for care, or when the deceased rented all his/her life. The heirs don't get a house in those cases.

Paying the interest - now that would be the rub. Either from a pension, if you have one or, as you say, a lodger.

[Palangot]

In an age where you are not expected to ever really pay off your mortgage; equity is just dead money - better just keep cashing out every 2 years to a new IO teaser tracker.

Anything less than 90% LTV is the excuse you need to go buy a new car, take a cruise or "add value" by sticking on an extension*.

Why should anyone pay off a mortgage? It's much more pleasant to continually live with a couple hundred pounds coming out of your account each month - sure if you didn't have a mortgage, there'd not be much point in going to work everyday until you are at least 68.

*Be sure to remortgage once they equity is locked in.

[winkie]

I don't know about intergenerational mortgages. It'd be more like the situation when properties have to be sold to pay for care, or when the deceased rented all his/her life. The heirs don't get a house in those cases.

Paying the interest - now that would be the rub. Either from a pension, if you have one or, as you say, a lodger.

....things can be adapted.......why would people need to sell their homes to pay for care when your children will be living with you caring for you, maybe that will be the only form of work some can/will get.....switching of roles.

[roger196]

Paying the interest - now that would be the rub. Either from a pension, if you have one or, as you say, a lodger.

No doubt the benefits system will be tweaked so that the general body of taxpayers will be on the hook for this.

[The Knimbies who say No]

In an age where you are not expected to ever really pay off your mortgage; equity is just dead money - better just keep cashing out every 2 years to a new IO teaser tracker.

Anything less than 90% LTV is the excuse you need to go buy a new car, take a cruise or "add value" by sticking on an extension*.

Why should anyone pay off a mortgage? It's much more pleasant to continually live with a couple hundred pounds coming out of your account each month - sure if you didn't have a mortgage, there'd not be much point in going to work everyday until you are at least 68.

*Be sure to remortgage once they equity is locked in.

Yup, perpetual servicing of debt or regular commitments to pay for essential items (e.g. new car PCPs) is the only game in town for the chancellor whose prime concern is forcing as many into the workforce as possible.

[Snugglybear]

....things can be adapted.......why would people need to sell their homes to pay for care when your children will be living with you caring for you, maybe that will be the only form of work some can/will get.....switching of roles.

But what do the children live on? They're going to need an income too.*

I suppose the olds could apply for attendance allowance (currently £54.45 a week) and pay it to their offspring, but to get it they have to have

• a physical disability (including sensory disability, eg blindness), a mental disability (including learning difficulties), or both
• a disability severe enough for them to need help caring for themselves or someone to supervise them, for their own or someone else’s safety

The offspring might be able to get the Carer's Allowance (currently £61.35 a week) - only one of them, mind.

* Unless they eat and wear bits of the house that is worth so much.

[gf3]

I find the maths quite interesting. Say you bought a house when you are 30 and planned to die at 80.

On an interest rate at 4% if you had a spare £100 and paid it off the mortgage at 30 you would save £4 a year for 50 years £200. after 55 it wouldn't be worth paying off any more of your mortgage because the saving would be less than the money you put in.

If the interest rate was 2% it wouldn't be worth paying off anything at all.

Unless you like your children.

[gf3]

Another bit of maths I did. my mortgage is £420 a month. If I took out a life time mortgage at 4% my mortgage would be halved £210.

However I have only got 14 years to go my mortgage ends when I am 65. If I live passed 79 I am better off on my current mortgage.

[zugzwang]

Unless you like your children.

And living in the same house for fifty years.