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Lifetime mortgages?
Thomas James
Posted: 28 August 2015 10:25:45(UTC)
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what is the general opinion on lifetime mortgages?

One of my good friend's parent's mortgage is maturing next month, and after the poor endowment they set up at the purchase of the property they are left with a gap of 60 k.

His mum and dad both have retired and due to their age and income a re-mortgage is not possible and my friend has just been turned down from a number of companies due to not having a credit history.

After a little research on the topic I came across these Life time mortgages, If anyone knows anything about these type of mortgages or maybe have another solution please let me know.

Many thanks

Tom
Patrick Judson
Posted: 28 August 2015 15:25:05(UTC)
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If you service the interest each month the only difference is that it is for a life time as opposed to a fixed repayment date. Get a fixed rate of interest as well.
Can repay 10% of the capital each year if you desire.
magic beans
Posted: 28 August 2015 15:26:44(UTC)
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Funnily enough just signed up this morning. Do your research though as with anything financial caviat emptor.

Main thing to look at is what rate you would get given your circumstances. Run that through a compound interest calculator, in my case for 33 years cause I am going to live to be 100, and see how that is going to look in terms of estate to pass on. I didn't assume house value increase and it is still less than 50% of current value.

Also need to scrutinise costs. Some companies are more transparent than others some add charges for everything. Some charge for early repayment some add a residual drawdown charged at current rate when drawn and some then add charges for the paperwork for this. They charge for house valuation and solicitors fees and their own paper work all of which gets deducted from your advance.
The company I used does not charge these fees although that will be reflected in the fixed interest rate and have just reduced their paper work cost from £600 to £5. So the only deduction I get from the total is £5.

Plus if you take out one of these LTM's it reduces your estate by the then current value of your outstanding mortgage.

2 users thanked magic beans for this post.
Thomas James on 28/08/2015(UTC), Another Pensioner on 28/08/2015(UTC)
magic beans
Posted:: 28 August 2015 15:30:04(UTC)
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PS go to the companies direct and they will pass you onto their agents.
If you use the online companies you dont know who you are dealing with. Thats not to denigrate the online companies but if I am going down this route I want to see someone face to face not answer loads of questions over the phone.
1 user thanked magic beans for this post.
Thomas James on 28/08/2015(UTC)
Thomas James
Posted: 28 August 2015 18:35:18(UTC)
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Thanks guys a lot to process I will pass on the info to my pal.

Hopefully it's not to late to save the property as I spoke to him today and it was up this month.

Maybe they will offer a grace period, it with Leeds and holbeck so probably not as I have dealt with those animals before.

Thanks again guys God bless and have a great weekend and a smashing bank holiday.
Recently Redundant and Retired
Posted: 29 August 2015 09:13:34(UTC)
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I recently looked into a bargain property purchase locally. The property was about 1/3rd below market value. The catch was the property was only available as BTL and the contract allowed the current occupiers to live in the property to death at a reasonable rent, currently 6% return.
I think it went to sealed bids eventually.
magic beans
Posted: 29 August 2015 12:12:35(UTC)
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System used in France 'un viager' where you by the property below market price (30%+ish) and vendor has right of occupation until death plus you have to pay them a monthly pension.
Alan Selwood
Posted: 29 August 2015 19:02:09(UTC)
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Unless you have a big portfolio of such properties, there is a big risk that the lumpiness of actual life expectancy v. the average life expectancy can make this a risky, unprofitable deal, in my view.

Think back a while to the case of the French lawyer aged around 55 (?) who did a deal with a woman in her 80s whereby the house title was to be his on her death, but in the meantime she could live in the house rent-free. The lawyer expected to get the title to the house within a few years, and may well have treated the deal as a way of funding his retirement. The reality was that she lived to well over 100, and he predeceased her.
xcity
Posted: 29 August 2015 20:07:00(UTC)
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Good system for old people in France who have a house but little income though.
Means the house can be a pension for the buyer and seller.
Not sure the system really transfers well to this country.
jeffian
Posted: 29 August 2015 22:28:12(UTC)
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Recently Redundant & Retired,

The alarm bells rang loud and clear when I read your #6. I note that you didn't buy on this occasion but you may be tempted in the future. Although it is not completely clear from your post, this sounds as if it could be a Regulated Tenancy -

https://www.gov.uk/gover...a/file/11445/138295.pdf

- if so, besides giving the tenant security of tenure for life, the rent is also regulated to a "Fair Rent" assessed by the Rent Officer and, on death, the tenant is entitled to pass on the protection to the next generation. It is common for properties subject to Regulated Tenancies to be valued at around 20-30% of market value with vacant possession, depending on the age and family circumstances of the sitting tenant.
Alan Selwood
Posted: 29 August 2015 22:48:32(UTC)
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As jeffian says, you should take GREAT CARE when thinking of getting involved as a landlord unless you have documentary evidence that it is NOT a regulated tenancy.

Agree to nothing unless a reputable solicitor who specialises in this sort of property has vetted it and explained clearly to you what the rules are, with all benefits and pitfalls clearly addressed in writing to you.

To my mind, there are much easier ways of putting your money to work with more flexibility and less risk. Beware of changes in the law, too, after you become an owner, and political distortions in fair rents.
Recently Redundant and Retired
Posted: 30 August 2015 08:51:12(UTC)
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No, I didn't take this on because I don't have a financial plan to the end of my life and didn't want to tie up funds I might want to do something else with. Also I suspected the construction of the property would make it ineligible for mortgage should anyone want to sell it.
I was offering the example as an alternative to the LTM for elderly householders who still need a mortgage. Clearly in this case there were plenty of folk willing to give up their cash for the long term income.
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