Over 65, bank switched to principle + interest.

Hi,

Just after some general advice atm, see if anyone has a possible solution.

My dad (66 yrs old) has just had both his banks change his loans from interest only to principle and interest, stating they want to make sure he can afford the loan. Amusingly this has increased his repayments by ~$4,000/month which is somewhat counter productive to affordability.

Equity wise, he is fortunate enough to have significantly more in equity than in debt. However, the aim is to not liquidate any assets.

So question, has anybody dealt with this before, other than me going on as guarantor to refinance to interest only, has anyone gotten away with a wordy email, or supplying some sort of evidence to allow for the bank to stick to interest only? He is basically retired, so income is minimal. Am thinking of somehow using equity to service the loans.

Any assistance in this matter would be greatly appreciated.

 

Hi there,

What's your dad's income situation like? Is he self funded retiree with heaps in super, or on a pension? Are the properties IP's?

I do loans for older people pretty regularly, and with a good exit strategy it's not usually a problem as long as there's super and other income - rent, for eg.

 

Which bank?

 

Possibly, I have asked him to contact the banks again and clarify as it wasn't that long ago he had the houses refinanced.

 

Adelaide Bank and NAB.

 

Two of the worst!

But if they both changed to PI at the same time this may indicate that he did a couple of refinances around 5 years ago.

 

I have encountered a few clients who not only face P&I but lender has looked at the ir age and now demand a short term....cashflow nightmare

Broker advice is so important. One of tge unmentioned areas they guide for their time

 

What are examples of exit strategies? You need to give them a date (based on your age) by which you will sell?

 

Just the ability to sell, downsize, pay out with Super, close the loan somehow without being destitute.

 

Back to the fundamentals, reverting to P&I now will result in lower P&I repayments than if he stayed on IO longer and then reverted to P&I over a shorter term.

Being able to meet only IO repayments isn't part of a solid exit strategy.

 

Could he threaten to move to another lender and see if they give him what he wants? Always worked for me but I'm not 65 and retired..

 

May I ask what is the reasoning behind not liquidating one of the assets?

 

He's old school, doesn't believe in selling property.

That said, after walking through a few options with him, it seems he will liquidate and possibly put the money towards my sis upgrading her PPOR.

All's well that ends well.

 

Hasn't ended well yet! Hope he gets legal advice on that.

 

Old school....yeah.....maybe I am old school too....but I know I can't take it with me !

I have been asked what my plans are, banks want to know they will get the money back.

The thing is, if people want to hold property for a long time, you simply have to expect to pay the loan down, this other idea of 30 years of , or permanent IO only is not a sensible thing as a whole.

Agree with Terry, he should get good advice, there are many aspects to consider if he has multiple properties bought over time....