AIBU to ask about equity release?

[showmethemoulah5]

NC as paranoid.

So my mum lives in a house worth between 1.6-1.8m, there is about 60k left of the mortgage to pay off. My mum doesn't want to downsize for a long time but she would like to help my younger siblings onto the ladder (she would give me some too). She has been looking at equity release, as apparently this is how a lot of parents help their kids these days.
Apart from the adverts on TV I don't know much about it but thought it had negative connotations. My mum did say they are better now & more regulated plus you can pay back interest monthly to keep the repayments down. Plus her argument is that 200k is more useful to us now than say 400k in 20 yrs times (made this figures up).

Mum still works 2 day a week, has an ok pension & a holiday home.

Obviously she would seek expert advice but thought MNs might have experience, opinions, etc.

Equity release does not mean selling a percentage of your house at all. It means you take a mortgage and have the option of paying interest or not. It is a very expensive way to release money and you should consider all other options first. It is very heavily regulated now a days and it's unlikely an adviser will proceed without talking to the clients family. What your mum sounds like she wants to do will need advice first as gifting monies could have tax implications and could effect entitlement to long term care. But equity release is the difference between some pensioners being able to enjoy their retirement and going hungry in a cold house with broken heating (for example). And I say this as an Equity release adviser. Tell your mum to talk to a professional.

Just to echo what grumblepants had said. Equity release isn't for everyone and the compounded interest certainly can add up. It has changed a lot since the the "early" days. If you don't want the interest to compound, there is always the option of making interest only payments so that only the loan amount is due. This way as the house price increases, the same amount is always going to be due at the end (provided the interest payments are covered). There is some more information here:

www.equityreleasescotland.org/faqs/what-is-equity-release-and-how-does-it-work/

A colleague of mine bought her first property with one of those springboard family type mortgages, so her parents were basically deposit provider and guarantor until she'd lived there 2/3 years paying the mortgage then it was solely hers and they got their cash back. Would something like that be an option?

www.barclays.co.uk/mortgages/family-springboard-mortgage/

Something like this

Lots and lots of incorrect information of this thread. People are confusing equity release with home reversion plans. Two different things, two different products.

Remortgage - does your mother have sufficient income to obtain a mortgage? A £260k mortgage is going to need substantial income and high payments over a very short term.

Downsizing - ER Lenders will allow downsizing whilst porting the scheme, no penalties. However the new property must also fit their lending criteria.

Moving into residential care or nursing care - repay without redemption penalty allowed.

Death repay without redemption penalty.

IHT issues, very short answer she'll need to survive seven years. More complex but that's a short version.

Gifts to children - lots of people are cash poor but property rich, some parents want to see their children get some of the inheritance upfront and enjoy seeing them use it. Up to the individual and assuming mum is of sound mind, it really is her money and her choice.

Roll up interest - Aviva are currently offering 3.71% interest with optional payments. You decide is that worth it to now get the money and roll up the interest? That's a lifetime fixed rate.

You need to consider your mothers age as to what percentage she can borrow.

However you MUST go to a reputable IFA to source this, don't try and do it yourself.

However interest rates are very very low, so as she is working she would be eligable for the best deals......why does she not remortgage and give lump sums to DCs as others have said...

Except unless she earns £92k and repays the loan in the next 10 years (assuming she can work that long) she won't get the mortgage

Based on £460000 mortgage, 2.5% interest rate over 10 years

Repayments are £4336.

Not an option really!

*Can she not sell the holiday home and then save for the holidays instead?

These things are a nightmare*

Yep she could, the CGT payable on the gain after allowances is at a rate of 28%.

@showmethemoulah5 do feel free to PM me if you want some figures.