Case study
How we helped a father approaching retirement resolve his interest-only mortgage by adding his son.
Case summary:
Client type: Father approaching retirement and son in his 30s
Mortgage purpose: Remortgage with a transfer of equity
Existing borrowing: Interest-only mortgage at approximately 40% loan-to-value
New ownership structure: Son added to both the mortgage and property title
New repayment structure: Capital repayment over a term aligned with the son’s working life
Affordability basis: Son’s employment income and father’s future State Pension
Main challenge: Three years until retirement, with only State Pension income to follow
Recommended mortgage product: Five-year fixed rate
The client
Our client was a homeowner with three years remaining until his intended retirement.
His son, who was in his 30s, had always lived with him and intended to continue doing so permanently. He had a steady job and regular income, and they wanted to explore adding him to the mortgage and ownership of their home.
The situation
The father had taken an interest-only mortgage following advice in the early 1990s. The outstanding capital had not subsequently been addressed, leaving a balance of approximately 40% of the property’s value.
With only three years of earned income remaining, repaying that balance before retirement would require monthly payments he could not afford.
His income would then reduce to his State Pension. The mortgage therefore needed a repayment arrangement that would remain affordable after that change.
The repayment challenge
Although there was substantial equity in the property, the outstanding mortgage still needed to be repaid.
Switching to repayment over the father’s remaining working years would concentrate the capital repayments into too short a period. Extending the borrowing into retirement in his sole name would not resolve the affordability problem.
His son’s involvement created an opportunity to consider a longer repayment term, reflecting his age, employment and intention to remain in the property.
The affordability challenge
The father was still earning, but those earnings would stop only three years into the new mortgage.
An assessment relying on his current salary would not reflect the income available to support the arrangement over the longer term. We needed a lender willing to assess affordability using his future State Pension alongside his son’s current employment income.
The lender also needed to accept a mortgage term aligned with the son’s working life, despite the father reaching retirement much earlier.
The property ownership challenge
The son would be joining both the mortgage and the property title through a transfer of equity.
This reflected their intention to continue sharing the home, with the son becoming a joint owner and taking responsibility for the borrowing alongside his father.
He was a first-time buyer. The solicitor considered the circumstances of the transfer and confirmed that no Stamp Duty Land Tax was payable.
Our solution
We arranged a remortgage with a transfer of equity, adding the son to both the loan and the ownership of the property.
The new mortgage was placed entirely on a capital repayment basis, with a term that fitted the son’s anticipated working life. This spread the repayments over a manageable period and provided a defined route to clearing the outstanding balance.
We secured the lender’s agreement to use the son’s current employment income and the father’s future State Pension for affordability, excluding the father’s current earnings from the calculation.
A five-year fixed rate provided payment stability as they adjusted to the new arrangement, covering the father’s planned transition into retirement.
As the mortgage relied substantially on the son’s income, we also arranged an appointment with our associated protection adviser to discuss cover that could help maintain the mortgage payments if he became unable to work through illness or injury, or repay the outstanding balance in the event of his death.
Our clients’ outcome
Father and son were able to retain their shared home with a repayment mortgage assessed against the income expected to be available after the father retired.
The arrangement addressed the longstanding interest-only balance while formalising the son’s ownership and responsibility for the mortgage. It gave them a manageable repayment structure and certainty over their mortgage payments for the first five years.
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