Interest Only Home Loan for Pensioner with 60k Left

Fysh on 25/04/2020 - 23:11

Would refinancing to a 30 years home loan with interest only be sensible for a aged pensioner with 60k left considering the circumstances below?

There is a drop of over $100 per month for her over 30 years remaining. she refinanced aprox 5 years ago and has 25 years left atm.

I want to make her life as easy as possible. There is a possibility she will not finish paying off her house before she is forced to move to my house or to a retirement facility.

I personally think paying off the final amount doesn't present any advantage to her other than to put money into a retirement facility's pocket or god forbid myself and brothers wallet.

Financial

Comments

  • Ughhh on 25/04/2020 - 23:36
    +5

    Question is will the bank let you

    • Fysh on 26/04/2020 - 00:14

      Very good question maybe I should go to a broker.

  • Caped Baldy on 25/04/2020 - 23:49
    +1

    Downsize?

    • Fysh on 26/04/2020 - 00:12

      She is comfortable where she is and unlikely to move. I do think this would be a good choice I would personally do it if I was in this circumstance it's a 3 bedroom and she lives alone.

  • bobbified on 26/04/2020 - 00:59
    +4

    There is a drop of over $100 per month

    …other than to put money into….myself and brothers wallet.

    Could you and your brother just give her $50/month each and let her live out the rest of her life where she's comfortable now? Whatever equity she has in the house is eventually likely to be split amongst you.

    • Fysh on 26/04/2020 - 01:05

      Interesting theory. I wouldn't have a problem with this but I could see my brothers partner having issue with this due to their family expenses and kids .

      Maybe I could offer to do this for x% of the property. The only complication is I would need it legally done as I wouldn't want my brother to inherit my portion.

      • [Deactivated] on 26/04/2020 - 01:06
        +1

        Does she have a will?

        • Fysh on 26/04/2020 - 01:12

          Ooh this is an option but I don't know if this would work if she needed round the clock care prior as they take all assets for that.

          I do like the idea of splitting the difference as the outcome should benefit us and cost is minimal

      • bobbified on 26/04/2020 - 08:46

        The only complication is I would need it legally done as I wouldn't want my brother to inherit my portion.

        Fair enough. Each family operates differently, so I won't try to tell you what you should or shouldn't do with your mother.

        Although, if she has to sell up and move into a retirement facility because the mortgage can't be paid, I'm pretty certain the costs of the retirement facility will have a much much larger impact on the total inheritance than your brother would have (if you paid his share of $50/month).

  • garetz on 26/04/2020 - 02:30
    -1

    If you put it on interest only, when the loan finishes, you then have to pay the balance as a lump sum, is that worth doing ?

    Talk to an accountant/financial planner.

  • Seraphin7 on 26/04/2020 - 10:19
    +2

    Buy the place off her at market value. She can split up the net proceeds of the house equally amongst the brothers (i.e you also get your share back). Let her live their rent free until the time comes.

    Win - win - win.

    • [Deactivated] on 27/04/2020 - 14:11

      So Op buys the house but receives no benefit from it? If Op's mother needs to go into care and she no longer has an asset, who will pay for it? Op's brother gets his inheritance earlier without having to lift a finger?

      The only winner in this equation is Op's brother.

      • Seraphin7 on 27/04/2020 - 14:54

        House is worth $600k (for example).

        OP buys it for $600k.

        Gran pays off $60k.

        Gran splits the remaining $540k so OP and brother each get $270k.

        Any basic care will be funded from the pension (if my memory is correct the facility takes 85% of this), or as OP mentions she'll be moving in with them.

  • [Deactivated] on 26/04/2020 - 10:32
    +1

    Sounds great, if she will live to 120 and lives off food scraps and bark from age 90. Doesn't really sound like an actual plan to ever pay it off, and even that previous deal sounds irresponsible by the bank.

    Banks are under more pressure to lend responsibly and this plan isn't to ever pay it off. I think it would get declined in the post banking commssion environment.

  • miwahni on 26/04/2020 - 22:32
    +1

    If she struggles to refinance via a standard loan, she could look at a reverse mortgage. They're not without drawbacks - main ones being a higher interest rate and reduced equity - but there is usually no requirement to make any payment at all. However if she can at least make the interest charge each month, then at least the balance won't be growing. Not many financial institutions offer them any more, and she can expect to be required to obtain independent legal and financial advice before settlement. Still could be an option though if she doesn't qualify due to age / net assets for a standard loan.

    • Fysh on 27/04/2020 - 00:15

      Thanks, I'll have a look into reverse mortgages

  • [Deactivated] on 27/04/2020 - 14:14

    Honestly, I would just convince her to downsize: lower mortgage and lower bills.

    • Fysh on 27/04/2020 - 16:09

      She s actually setup a good solar system before retiring so she pays almost no electricity. She is very set in her ways.

      • [Deactivated] on 27/04/2020 - 16:13

        Have you asked her what she wants to do if refinancing is not an option?

        • Fysh on 27/04/2020 - 19:19

          She will just stay as she is. We just wanted to free up some money so she could work a few hours less.

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