Equity release? We’re desperate :(

[JupiterFortified]

If anyone can please offer any advice I’d be really grateful.

My dad recently passed away and my mum is left with a house with a large mortgage remaining on it.

The mortgage ends soon and we have no means with which to repay it (mum
only has state pension income).

Following dad’s death I don’t think she’d cope if she had to move out of their home :(

So we are thinking her only real option is to apply for an equity release mortgage to pay off the mortgage - does this seem like the best option?

I am lost. For what it’s worth, I’m not worried about any potential inheritance being eaten up by the interest on the equity release. I just want my mum to be able to keep her home :(

In the short term, get some lodgers?

But the cold reality is she's probably not going to be able to afford to stay there. You're fixating on paying off the mortgage but how will she afford to heat or maintain this property on her pension?

Speak to equity release companies by all means, but there won't be a penny left at the end.

From a selfish point of view I don’t want the house sold either because I can’t bear to let our memories of dad there go.

And I know it would break her heart to go.

I know what you’re saying is rational but I suppose I’m thinking if the only objective is to allow her to stay there then perhaps equity release is the answer.

I don’t know.

I suppose otherwise I sell mine and buy hers. Very far from a great plan though :(

The problem with equity release is that if she needs to sell (e.g. for reasons of ill health) she won’t be able to because the debt comes due if the property is sold.

She will be massively limiting her options for the future while it sounds like she’s got enough equity to downsize now.

She could end up trapped in a money pit falling apart around her.

I understand the knee jerk reaction of wanting her to be able to stay in her home but I think you need to seriously consider whether that is for the best.

Totally agree regarding equity release, I would not do it. I'm not even sure it can be done to pay off an existing mortgage but rather just to release equity for improvements or adaptions ?

Thanks, you’re probably right. Between us we could probably cover her bills but she’d hardly be living a life of luxury on a state pension.

OP’s Mum is 73. The war ended 77 years ago. I doubt that he had a war pension.

Have you talked to the mortgage company about extending the term of the loan?

With rates going up, it'll be around £250 or £300 per month interest i think. You'll be able to see exactly what it is historically and currently by her/ your father's bank statements.

Can she afford that, or can you support her with part payment?

My widowed mum of 80 yrs is in a house that has around £80k outstanding on an IO loan. They seem to extend it every few years. There is enough equity in the house that I don't think they are bothered about waiting (i.e. house sold when she goes into care/pops off).

Extending the term would be by far the simplest option if the monthly payments remain manageable

Good luck OP and sorry for your loss

I'm fairly certain equity release can be used for any purpose, including paying an existing mortgage. I am clearly not against it in principle but agree house needs to be suitable for her now and long term and she needs to have the income to maintain it too.

Contact the mortgage company, explain the situation, ask for a bit of grace for your mum to gather her thoughts. I work in a mortgage department and we have more people past the term on their interest only mortgage than you'd think. We'd consider repossessing eventually but most are elderly so we much prefer not to. They'd likely give her more time in the circumstances.

They will have asked about a repayment vehicle at the time. It's worth asking them what they have on file about it in case they have details of a policy or endowment somewhere.

If your mum can't do it herself, would you consider getting an authorised broker or solicitor to contact the mortgage holder to request all of the following:

1. A copy of the original mortgage offer letter - see if it's a straight interest only agreement or has any endowment element
2. Detail of the life cover taken out at the time or the reason for a waiver if it wasn't required
3. The basis for the interest only approval

Then when you have the actual facts, you'll be in a better position to agree next steps

1. Are the mortgage company willing to extend?
2. Is an equity release really possible? Unlikely given age & income?
3. Are you family able to be a joint borrower? Do you even want to it you have capacity?
4. is a life loan a possibility? I.e. she can life in the house fir the rest of her life but the bank will sell the house once she passed?
5. Is downsizing definitely not something she will consider? She may have no choice?

Is there a solicitor dealing with your father's estate? They should be able to advice you?

The problem is even if the mortgage company would extend the loan, it's unlikely to be interest only again so your mum would still have to start finding repayments each month surely ?

From a selfish point of view I don’t want the house sold either because I can’t bear to let our memories of dad there go

Your memories of your dad will always be with you, wherever your mum lives, they're hardwired into you, not the house ❤️

I understand it's tough, but practically, your mum will spend the rest of her life struggling of she does this, the mortgage will be paid, but she will still need to pay all her bills, utilities and food etc. You need to try and put emotion to the side when making a decision like this, as it's huge!

I'm so sorry though, for both you and your mum, trying to grieve and sort out practicalities is an absolute minefield, I hope.youre both taking care of yourselves 💐

Sell the house. Seriously. Memories are always there I lost my dad many years ago he was young. I don’t have anything of his. I don’t need it. It’s my head and heart - his love. Life is for the living. Time to think practically.

Not sure you can get equity release if there is an outstanding mortgage.

I would not do anything rash at this stage. Get all your dad’s finances together and figure out where you are first. I would ask the lender for a moratorium on payments given the circumstances while you figure it out.

Overall I do think the most sensible option is to downsize and get a lump sum then help your mums to live within her means.

It is sad to lose the house but what will you do when things start to break or need repair? Where will you find the cash for rainy days?

In the midst of all this, I am sorry for yours and your mum's loss. How long is it since your dad died? Is your mum managing to meet the mortgage payments and other bills right now?

I'd suggest a downsize here, someone will have to maintain the house too, so would use this as an opportunity to find something less expensive and easy to maintain.

No help on the house but if your mother only has a state pension apply for pension credit. If awarded it will top up her income but will also entitle her to full council tax reduction this is not widely advertised. I think you can apply over the phone. Start the claim as soon as possible I’m not sure if it can be backdated at all.

OK, so obviously there are lots of things you need to check out first but if your DM really wants to stay there long-term and you think it's genuinely feasible, then you could consider equity release.

Modern equity release isn't always as bad as people think because there are lots of different types.

We have just done an equity release. We picked a product where we are allowed to repay up to 10% of the capital every year. After 8 years we are allowed to clear the whole balance without any penalties.

The interest rate is fixed for life - it won't ever increase. We are locked into a really competitive rate which is lower than my mortgage was. We did the sums and it worked out much cheaper than a 10yr mortgage (which was the alternative).

You can use equity release to pay off the mortgage. Is there any capacity at all for your DM to continue paying any amount? She could pay the equity release company the value of the interest every month. This would prevent the debt from increasing and mean that the remaining value of the house is preserved - for either her, or for your inheritance.

it is essential that you get the right kind of equity release though - don't opt for the type that gives away her ownership to the property. I think the one that my DM took out was called a "lifetime mortgage" - it's essentially an equity release product that you can repay.

My suggestion is that you talk to the mortgage company, negotiate an interest only period for a year or so. It would at least give you time to come to terms with things and choose the right next step.

From my experience with my Mother in Law, staying in your own house can be a really lonely existence and it's a lot of work looking after a big house on your own as you get older. She might be better off buying a flat in one of these Over 55s flats where there is more company around, people to do things with. She'll also have a bit of money to start enjoying herself too.

Even if she is able to get equity release to pay off the mortgage I don't think she should. How are all the bills to be covered with just a state pension? How is she paying the interest on it at the moment?

This is sadly the harsh reality of not getting finances in order in case of bereavement/redundancy or retirement. Interest only mortgages are a time bomb and they were usually given as a temporary solution to cover reduced income but many never converted back to repayment and then obviously found themselves in the same situation as your mum. The mortgage is due to finish but is no where near being repaid.

I think selling it is the only option. You are not doing her any favours in getting her hopes up with your plan of equity release. Far better to help her through the letting go process and finding somewhere more affordable for her.

How difficult for you all.
But I do feel the best option is to sell the house and buy outright. You are securing your mums future and comfort.
I appreciate it is tough but you need to protect your mum here. The sentiment you feel for the house will not secure your mum's future.

Totally understand the emotional side but it's time to put that aside before such a huge decision which as PP said may make the house un-sellable in the future if/when it has to happen. Finding a way to extend and getting breathing space is likely the best option for now.

A PP also flagged asking the mortgage company what was the original plan for repayment? Did they use a mortgage broker before and any paperwork to show who that was? Did an assurance policy pay out in the past and where did that money go to?

some of the endowment policies were ruled missold so alot of people cancelled it for a payout

Approach the mortgage lender and ask for advice, they might be able to reduce payments by extending the repayment time. If there is plenty of equity then the lenders have nothing to loose.
I'd steer clear of equity release until you've exhausted other options.
Check to see if there was life insurance sold with the mortgage.
Perhaps downsizing would be advantageous as she could own outright and have a smaller property with reduced utility bills, maintenance and council tax banding.