Meet Janet and Peter
Janet and Peter are in their early 60s and are both still working. They live in a semi-detached house in East Sussex which is valued at £275,000 but has an outstanding mortgage of £42,000. Their bank has started to write to them, telling them that their mortgage term expires in 2016 and asking how they intend to repay the outstanding amount. They became worried that if they couldn’t raise the capital to clear their mortgage, their home could be repossessed.
They decided to go to their current mortgage provider and ask for their mortgage term to be extended, but they were told that was not possible. They then asked other high street banks if they could remortgage with them, but again were turned down. They began to worry about what to do, and decided that they needed to see a financial adviser to find out more. The financial adviser told them that because of their age, mainstream mortgage providers would be unwilling to help them.
The financial adviser discussed the possibility of downsizing with Peter and Janet, but they decided against this as they didn’t want to leave their local community and their home was conveniently located for their jobs. Understanding this, their financial adviser started to talk to them about an interest only lifetime mortgage.
He explained that it operated in a similar way to their current mortgage. They could release some money from their home, and each month a fixed amount would be collected from their nominated bank account to service the interest. This would allow them to clear their mortgage shortfall without needing to move home, while allowing them to eliminate any interest roll-up on the loan.
This recommendation was a sensible solution for Janet and Peter, as they were able to clear their outstanding mortgage without giving up the home they had loved for 25 years.