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 :(

Unfortunately I think a lot of people with interest only mortgages don’t understand, or plan for , what happens when they are faced with repaying the loan.

I am not sure why a poster thought asking if OP’s father qualified for a war pension was significant, but it would not be impossible.

Until replaced by another scheme in 2005 ‘war pensions’ were paid to service personnel who received a disabling injury as part of their service. It doesn’t need to have been in WW2 or the Falklands war. They could even be paid for injuries whilst representing the service in sporting events.

This. There are quite strict rules about interest only mortgages and the bank are obliged to keep a record of how the mortgage is to be repaid at the end of the term. At least then you'll know what you're dad's plan was.

Only is she is entitled to Pension Credit.

Sorry for your loss @JupiterFortified , the reality is unless you find some kind of insurance that pays off the mortgage your mum will be better off in the long term selling the house and you need to persuade her to do so .

A couple that I know did equity release a few years ago. Now they are struggling to live in the house that they were determined to keep and would like a bungalow but can't afford anything at all.
They believe they no longer own 'their' house.
Short term gain but long term loss.

I have no knowledge of the subject except this, but if correct, it is awful.

A friend's mortgage provider checked on theirs as the mortgage provider was notified by their old insurance provider that they were no longer with them after they switched to a different insurance provider

@JupiterFortified I am sorry for your loss.

You are also grieving and it is having an impact on you really understanding the position you and your Mum are in. You are thinking about today and tomorrow rather than 1 year, 5 year, 10 years time. Here are some questions for you to think about:

1. How will your Mum afford to pay the running costs of the house? Think about the current cost of living and price rises. Is she going to be paying to heat rooms that are un occupied most/all of the time?
2. How will your Mum pay any maintenance costs? Is the house currently in a good state of repair or does it already need money spending on it? Who will look after the garden in the summer?
3. If your Mum needs care, how will she fund it? Do you really want to see her only receive council funded care? That is what could happen if you go down the Equity release route.
4. What were your Mum and Dad’s plans for their old age, were they at any point planning to downsize?
5. Wouldn’t your Mum be better off in a flat and/or sheltered accommodation with maybe a small nest egg to help her in her later years.

Practical things:

1. Check if your Mum is entitled to any benefits as her income is relatively small.
2. Talk to the mortgage company’s bereavement team, they may be able to extend the term of the mortgage to give your Mum time to sell. She may have to find £ for a higher interest rate.
3. Keep going through your Dad’s papers to try and find an endowment policy or records os how the mortgage was to be paid. You will need this to do probate any way.

Finally, the most important question is what quality of life would your Dad want for your Mum, living alone in a house she can’t afford to run or maintain and potentially going into council funded care vs a flat that is economical to run and maintain and with the ability to sell it to fund care should she need it?

I know it’s a hard decision to sell your family/childhood home but realistically it is the best option by far.

OP, to be honest, your Mum is not that old. I'm near her age and if/when DH dies I'll have to face some hard financial decisions too. Personally I'd say that you need to get a financial adviser to speak to her ( and you) about her options.

She may have left all this to your Dad when he was alive, but we all have to face reality when the time comes. I can see how you just want her to keep her house, but in real life it doesn't always work that way. They have both been living in dream land, thinking that somehow everything would work out fine, but now it's time for reality . Your Mum might just surprise you , if you give her the cold hard facts and explain what her options are .

Make sure your mum realises what equity release means. I think it possible that she’d rather move than decimate your inheritance (even if you don’t mind)

Sorry for your loss. Remember that houses are just bricks and mortar. Your dad lives on in your hearts.

As someone said above, it's possible that your mother's state pension will increase ie she will now get a full state pension (not a reduced one of about 60% for a married woman on her husband's contributions) plus possibly some of his SERPs too.

Did she ever work and pay into a pension herself? Often people forget about odd years they have worked long ago and never claim a small pension or fund value. Applies to your father too btw. Worth contacting any company he /she worked for going back to age 18.

You say your father was still working. Does that mean he may have a pension fund / dependant's benefits from that work still to claim? If he had a work's pension/ private pension there may be widow's benefits for your mother.

How organised was he? Are you confident that you have all his financial papers etc? It's worth checking his bank statements to see if he was paying out or getting any unaccounted for monies. You can then contact the companies and ask for details. IME people often forget what they have / mislay documents so evidence of share holdings eg may just be a slip of paper with last year's dividends on it.

Have you utilised the 'tell us once' service from gov.uk? It can help when it comes to pensions and benefits etc albeit may take a few weeks for them to process. Private pensions will need to be approached separately.

And I don't understand the folk getting their knickers in a twist over war pensions - the most recent wars our armed forces have been involved in weren't as long ago as WW2!

Unfortunately though if it's an interest only and your mum won't be able to manage the payments I think the only option may be to sell no matter how sad that is 🙁 I'm sorry x

I am really sorry you lost your dad.

It sounds like your mum and your dad have made quite bad decisions financially. If she does equity release now, she is compounding this issue.

She's only on a state pension. She cannot possibly have any spare money to repair the house in future years. I know she wants to stay in the house, but if she does, she faces severe poverty. She needs to sell the house and buy something much cheaper than the equity and have some savings for repairs etc.

If your dad was drawing a state pension, she will get some of that added to her s. My mum was quite surprised how much.

I'm sorry but I think you need to be very objective with your mother about the money she has coming in and what her outgoings will be.

I am sorry for your loss and that you and having to sort out this mess whilst grieving.

A £180k mortgage post retirement age was absolute madness. May I gently ask if your late father was irresponsible and whether there may be debts lurking of which you were unaware?

Have you explored the widow's pension re the oh pension?

Personally if the mortgage can't be repaid, I think your mother has to downsize and there's no alternative. You talk about her generation but she's only 10 years older than me and should be able to take some responsibility for this and be fully involved with a rational and objective plan.

Do not contemplate a retirement/McCarthy and Stone set up. They are barely saleable and the high service charges rack up.

Further to my comment above, a quick google suggests there is criteria your mum would need to meet to inherit some of your dad’s state pension. Presuming I read the info in the link below correctly, if your dad started to draw his pension before 2016 and contributed to the additional state pension as well as the basic state pension your mum may be entitled to inherit some of the money from his additional state pension.

In the link it says, ‘If you were married to your spouse or civil partner before 6 April 2016 you may be able to inherit up to half of your partner’s additional State Pension or protected payment. Protected payments usually account for any additional State Pension built up but paid out under the new State Pension.’ It goes on to say you should contact the Pension Service to check what you can claim.

www.moneyhelper.org.uk/en/benefits/benefits-in-later-life/state-pension-death-benefits

I would also agree in your mum’s circumstances it may unfortunately be more sensible to sell up and buy somewhere smaller which she fully owns.

If your dad was drawing a state pension, she will get some of that added to her s. My mum was quite surprised how much.

@JupiterFortified OP has said her dad was working and was quite a bit younger than her mum so presumably not state pension age.

Agree with everyone OP, the safest way to ensure a secure future for your mum is to sell.

Sorry should have tagged @ganachee , not you Jupiter.

This. Any inheritance is irrelevant- her financial situation is such that she needs to sell to release enough cash to live on. Equity release schemes are a total rip off and what happens when you all come to your senses and realise your mother can’t afford to live in this house?

What about if you (and any other siblings ) pay off your mother’s mortgage? Because frankly, you’re going to need to subsidise your mother at some point.

My ds works for a bank.
There is a surprisingly large amount of people in this situation who have made no provision for paying off their capital at the end of an interest only term.
Most of these mortgages were taken out 25 years ago when interest was low and banks were throwing money at people.

@JupiterFortified I know you're worried about your dm but she needs to sell and she needs to do it soon.
73 is not old, she could live 15 more years easily and equity release would only give a temporary respite with even more misery in the future.
This is an opportunity to future proof your dm's aging process by finding her a nice home suitable for changing needs.

@JupiterFortified given the house value and equity, I don't think equity release is viable. You absolutely can use equity release to pay off the existing mortgage, but they won't release that much. My parents had a £460k value and the total amount available for equity release was £160k.

Thanks @Paq, sorry I missed that her dad was working.

So much misinformation and misunderstanding about equity release on here!

OP - I'm sorry to read about the loss of your dad.
I don't know if equity release is suitable for your mum; but a few things I do know about equity release, from very reputable mainstream providers:

• Having an outstanding mortgage does not prevent you accessing an equity release scheme, and it CAN be used to pay off the mortgage.
• Not all equity release schemes increase the debt on the house - depending on the type of scheme you choose, the debt can remain the same, paying ongoing interest on the equity loan as you would on an interest only mortgage - the rates are slightly higher but not unreasonably so. Basically a lifetime mortgage.
• Equity release schemes can be portable - you can move house if you choose the right scheme.
• Equity release loans can be redeemed after a set number years without penalty, should the need arise, depending on the one you choose.
• There are many options for equity release, depending on circumstances.
• Most lenders offer a 'no negative equity' guarantee - so the amount owing will never be more than the house is worth.

Equity release is certainly worth investigating - it is now highly regulated, and offered by reputable high street lenders. All of the pros and cons and costs will be fully explained and transparent, and you and your mum won't be rushed into a decision.
Please do your own research and don't be put off by the scare stories - You might find it's not suitable but don't dismiss it out of hand before you know what's available. It can be a very viable option. There is no virtue in owning a smaller property outright if its not the best option for your mum in her latter years.
If you decide the equity release option isn't suitable - have you looked into remortgaging for your mum? Some lenders will approve up to age 80. It will give some breathing space for a few years. If circumstances allow, perhaps you might consider becoming a joint mortgagee to facilitate it if her income level would be a barrier. Lots of possibilities.

Really sorry about your Dad's passing.

However, if your Mum is now staying in a house she can't afford, she will have to downsize/move.

Could this be part of the grieving process/fresh start?

I don’t think she’d cope if she had to move out of their home

She doesn't have a choice if she cannot afford the mortgage.

Could she stay with you while she sorts her finances out?

How do people end up in this mess . How did your parents not know the mortgage would need to be paid off at the end of the term if it's interest only ( clue in the name )
Equity release is awful and downsizing is the only sensible option .