I have recently taken out an equity release mortgage. I agree with a pp that it can be a more exacting process than ordinary mortgage applications: the lending companies can have weird additional criteria about the property that need to be satisfied, which may not come up until you're some way into the process and which are not consistent across the industry. Give yourself plenty of time and prepare for it not to be quick or simple.
However there are some real errors and misonceptions being put across on this thread.
So in reality there is £270k equity in the house. She almost certainly wont get equity release for that amount. Even if she did, how would she be able to afford to live there just on her pension?
No, it's the other way around. She would need to raise the £180K to pay off the outstanding mortgage. At her age (the ER companies will lend more the older you are) I think that should be doable, though you'd have to ask a broker to do the sums (which they can do very easily when you first enquire).
So you need 180k to clear the current mortgage to be replaced by a rip off equity release scheme. Kiss goodbye to any inheritance if you do that, all the equity will be gone in a few years.
Doesn't follow at all. When you get quotes for ER they will include a calculation of the compounding interest over the first ten years or so, you can see exactly how much will be left. My deal was about 5% (recently, so probably fairly indicative), and that much compounding interest on £180K is certainly not going to wipe out £270K's equity "in a few years".
You then have to bear in mind that house prices, generally over the long term, increase by more the inflation. If you pay 5% on the ER and the house increases in value by an average of inflation + 3% between now and when your mum dies, you will have effectively paid 2% pa.
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.
Not quite sure what is meant here. If she has to sell to go into care, of course she can. The debt will be paid to the mortgage company and the remainder of the equity is hers. If she has to sell to downsize, all ER products (that I saw) contain a "downsizing protection" clause that ensures you can do this. You port the relevant proportion of the mortgage to the new property and the rest is paid back from the difference in price.
Some other points: Most ER deals allow you to pay back a certain amount each year without penalty, so if you wanted to operate it more like a normal repayment mortgage, from your own income, you could. Also the lock-in periods tend to be 8-10 years maximum, so at that stage you could swap it for a better deal with another provider, if interest rates are lower.
I'm not trying to tell you to do it, just to be a bit more accurate about what's involved.