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Can a pensioner remortgage?

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  • 22-05-2020 2:37pm
    #1
    [Deleted User]
    Posts: 14,344 ✭✭✭✭


    Hi folks.


    Friend of a friend (not very tech savvy) asked me about this and I can't seem to get any real information on the internet, so I figured it'd do no harm to ask here.

    The man turned 69 in March. Has a mortgage on his house. His house would be worth about, at a guess, 170k. He owes €30,000 on the mortgage, but he got a loan to buy the house off the credit union, so he's paying a massive interest rate on it.

    (I myself actually have a Credit Union 'mortgage', which is how the subject came up).

    He only gets the state pension, and said he asked his bank (Bank of Ireland I believe) about getting a loan off them to clear his mortgage, and said he'd have no issue giving them a legal charge on the house. I thought, considering the LTV is so good, and that if he doesn't pay the loan back, you have a very good chance of getting your money back out of it, that the bank would jump at it.

    However, they said no. He's too old, so they won't entertain him. They didn't get into talking about his finances, or interest rates or anything like that. Apparently he's just too old and that's that.

    I'd have thought that once the bank were being offered a legal charge on the house, then they'd be keen to offer loans? (especially in the case of a one-owner house with a pensioner applicant, who has a good LTV, considering 30k is just under 20% of the 170k the house is likely to be worth).


    So I just thought I'd ask on here if anyone knows any way around this or any banks/mortgage lenders that deal with older people? Or do they all have the same age cut off, despite the type of loan?


    Sorry for the long post.


    Cheers :)


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    #2
    coylemj
    Registered Users Posts: 25,345 ✭✭✭✭coylemj


    I'd say there are two issues here....

    1. Your friend's only income appears to be the state old age pension so how is he going to pay back a loan of €30,000?

    I know you said there would be a low LTV but that's looking at it purely in the context of security. The primary issue for the bank is: can the borrower afford to pay back the loan? If he fails that test, the security is irrelevent. They're not going to throw money at him simply because it will be a 'secure' loan. Because ......

    2. Their fear would be that your friends dies and a son or daughter will move into the house and simply sit there and ignore the outstanding mortgage. And if they have young children, it will effectively be impossible to evict them.


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    #3
    [Deleted User]
    Posts: 5,121 ✭✭✭ [Deleted User]


    Even if it played out as you outline, your friend could live for another 30 years. Would the bank wait till then for their money.

    Unfortunately your friend is too old for a mortgage.
    Retirement age is one of the limiting factors when getting a mortgage here. They want you to have it paid off before you retire and your income drops.

    In the UK I used to see ads for equity release products. A lender gave you a lump sum but took a part of your house which was sold on your death. I can't imagine they were very good value or ever available here.

    I think 30k is below the minimum they will lend for a mortgage too.


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    #4
    3DataModem
    Registered Users Posts: 3,957 ✭✭✭3DataModem


    30,000 is way too low for a bank to lend profitably for a mortgage, the fixed costs on their side are too high.

    Also there is no security of collateral as no bank will take charge of a sale of a house (and pay the agent and legal fees of sale, and the legal fees of seizure) to recover a 30k debt.

    He should shop around for a cheaper personal loan, or borrow from a family member who is happy to risk 30k to make the old man's life a little less stressful and expensive.


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    #5
    Henry Ford III
    Moderators, Business & Finance Moderators Posts: 17,634 Mod ✭✭✭✭Henry Ford III


    Mortgage looks impossible. Term, age, income are all outside the criteria.

    Having an expensive €30k debt at that age is a bad position to be in.


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    #6
    phormium
    Registered Users Posts: 3,296 ✭✭✭phormium


    He hasn't a hope of getting a bank mortgage, ability to repay is the number one criteria and a state pension would get you nowhere plus then there is the age issue.

    How massive is the interest rate he is paying? I presume he is not paying normal lending rate but has some sort of secured rate at least based on the house as security.


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    #7
    [Deleted User]
    Posts: 14,344 ✭✭✭✭ [Deleted User]


    Cheers for the replies folks. It looks like it's a non-runner, so. Just figured it'd do no harm to ask.

    phormium wrote: »
    How massive is the interest rate he is paying?

    He's with the Same Credit Union as me, so I'd assume 5.9% as i believe that's their 'secured' loan rate (robbery, of course).


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    #8
    AnRothar
    Registered Users Posts: 541 ✭✭✭AnRothar


    There are gaps in your friends information.
    The man turned 69
    He only gets the state pension,
    Has a mortgage on his house.
    He owes €30,000 on the mortgage
    When they drew down the funds they would have had to prove an ability to pay.


    To arrive at a point in time where their only income would be the state pension while €30,000 is still owed would have been massive a red flag.


    If they are struggling financially they need to talk to mabs or similar.


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    #9
    phormium
    Registered Users Posts: 3,296 ✭✭✭phormium


    Presuming something happened between when the mortgage was taken out and now, like unemployment, illness, 2008 crash, something obviously happened to cause an amount to be still outstanding at this stage, not uncommon unfortunately!

    Chat with MABS would do no harm though to see if they can renegotiate anything with CU


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    #10
    [Deleted User]
    Posts: 14,344 ✭✭✭✭ [Deleted User]


    I didn't prey too far into his info to get those details, but I do know in the area I'm in, of at least 2 other people who will never have their house paid off before they die. One of them re-mortgaged repeatedly and went on madly expensive holidays, had a flashy car etc. but i think (rumor) that she was on the verge of the house being taken off her altogether.

    She moved out for a while and the house was locked up, but she's since re-appeared so no idea what happened, but it seems like it can be easy to get in over your head if you want to. I do think a lot of these things came pre-2008 though and these people are still just being hit with the debts they built up.


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    #11
    coylemj
    Registered Users Posts: 25,345 ✭✭✭✭coylemj


    Deleted User wrote: »
    I didn't prey too far into his info to get those details, but I do know in the area I'm in, of at least 2 other people who will never have their house paid off before they die. One of them re-mortgaged repeatedly and went on madly expensive holidays, had a flashy car etc. but i think (rumor) that she was on the verge of the house being taken off her altogether.

    We all know why she did that, she was getting a stream of letters from her bank telling her to 'release the equity' in her house. Which was code for 'borrow as much as you like, there's no tomorrow'.

    And all the while, Anglo was pumping billions into a developers' speculation bubble. And thanks to goading by Shane Ross in his Sindo colum, AIB and BoI jumped on board the sinking ship.


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    #12
    Henry Ford III
    Moderators, Business & Finance Moderators Posts: 17,634 Mod ✭✭✭✭Henry Ford III


    coylemj - That's a/. wholly speculative. and b/. totally irrelevant.


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