Posted on 2 September 2010 by David Earlie
My father has been retired for the last few years due to ill-health. He has a home valued at £550k with an outstanding mortgage of £250k. The problem is that he has around 18 months left on the term and has been unable to extend it. He has a private pension due to commence in around 3 years time which would take care of the mortgage payments and probably reduce it quite significantly. Apart from selling his home is the an another solution. He is 63 in November.
Your father is in a very difficult position and needs to take advice on several fronts.
The most pressing concern is the reluctance of his existing Lender to extend the mortgage term. This leaves your father in the position of having to sell his property and downsize or try to remortgage to another Lender. As it stands I presume that your father does not have the available income necessary for a new Lender to consider the size of the loan currently outstanding? If this is the case, then I think you should explore whether or not it is feasible to take his pension early. This could enable your father to reduce the loan size by using the tax free lump sum and bring it down to a level where the pension income is sufficient to support the mortgage payments. In this situation he may then be able to remortgage prior to the current mortgage becoming due for repayment. I recommend that he speaks to an independent financial adviser in this regard.
It also occurs to me to ask what your father's original repayment plan was? It is possible that he was planning to use his pension as above, had a separate investment plan or was always going to rely on selling the property. Whatever his plans it shows the importance of planning for the future and taking professional advice. If he did take professional advice or relied on the Lender's mortgage adviser he may have grounds to launch a complaint against them. I recommend he speaks to Citizens Advice if this is the case and asks for their help.
I don't know what your circumstances are, but have you considered raising capital on your own property to reduce the outstanding mortgage debt to a level where your father could remortgage?
Finally, your father should speak to Citizens Advice to make sure that he is currently receiving all the benefits to which he is entitled.
Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.
We recommend you seek professional advice with regard to any of these topics where appropriate.