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 :(

Bit harsh given OP's circumstances. It happens all the time for all manner of reasons.

Because, in any of those scenarios, the father would have been a military professional (a small number of young men doing National Service saw active combat in the Korean War, but not many). He would therefore have had a military pension, which would be of far more relevance to his widow that a war pension.

Even when the war pension scheme existed, widows were only eligible if the man died as a result of the military service . Even in the very unlikely circumstance of the OP’s father having served in WW2 or the KW as a non-regular, how likely do you think it is that he would have died as a result of that service in 2022?

She's only 73 why do you think she wouldn't cope with a move?

Sell up and downsize would solve all of this. Equity release is madness. This is all a very expensive solution to something that might not be a problem.

I'd get your practical head on, though appreciate it's hard. You sound like bath if you have got the emotional and practical all muddled up. Understandably given the early death of your dad.

Be realistic. A big house will need caring for and maintenance, all of which are expensive and on a state pension, pretty unaffordable for a full sized house.
Memories are important m but they are just that, and they will always be in your minds. No one can take that away from either of you. The memories will still be there even if the house isn't.

You all need to let go a bit a start thinking if the future. 73 is not old, and offers time to live a bit. Something that could be possible if the financial millstone was lifted. It's daunting but could also be really freeing for you both.

Emptying a house, and saying goodbye to it can be part of the grieving process for you both.

Imagine a future where your mum is safe, warm and has sufficient money not to scrimp for every penny. Where she and you can make new memories of afternoon teas oily (or gin in the pub!) and nice weekends away in the country. Or going on a trip to the seaside. Or going out for Sunday lunch with the family. All sorts of lovely things, and living in a manageable space , maintained and heated, bright, fresh and clean.

Look forward, have courage, sell the house. Seriously in the long term it will be the best decision.

Could you move in with her and rent yours out. Or do a house swap? Build an annexe?

Op

as a matter of urgency you need to look at your dads bank statements- see if he was paying life insurance if any sort

I also agree with a previous poster contact the mortgage company and see what he told them about how he intended to satisfy the outstanding loan at the end of the term

definitely check out his private pension scheme benefits

check what widows benefits your mum is entitled to - on gov.uk

I would also consider moving in with your mum and renting/selling your house

the equity company would literally swallow the whole value

someone on here the other day said a 50k loan cost a relative 650,000 in the end. How that’s legal I don’t know!!!

I am so sorry for your loss but you need to take a deep breath because this idea though in the short term solves your issues just creates many more in the longer term.

With that amount of equity selling up and finding somewhere smaller and having the remaining income is the best option and one which you need to face together

You're at risk of making a terrible decision for reasons of sentimentality. It's understandable in grief but you need to make a sensible financial choice for sound reasons and now just because your mum at the moment wants to keep her home.

Given their ages and them having an IO mortgage the sale would have been inevitable unless there was significant money/insurance in the estate. From your explanation there isn't sufficient provision and so the best course is to try to sell and downsize.

I would get some free and independent financial advice.

I think now is where you have to support your mother, by thinking with your head, not your heart. Try to detach your personal feelings about the house and to not jump to the conclusion she must stay put. Gather all the options, pros and cons, thinking not only about now and the immediate aftermath of your father’s death, but what will happen in the future. At some point the house will become un affordable/ un liveable, so would she prefer to move to somewhere of her choosing now or do it when she’s 10 years older, less money and choice. It may be easier to work through the options with your husband if he’s one step less emotionally involved with the house and your parents.

On a practical level, definitely talk to the bank or find the original mortgage offer which will from memory have details of payment vehicle attached. If your father was still working did he have a death in service benefit, either from his employer, or something like union membership.

I don't know if we are allowed to name companies but my parents have a lifetime mortgage from Yorkshire Bank they are older than you mum and used it for a new build last year. It is paid from their pension. And if one dies there is life assurance to ensure the other remains in the house till they die. It's very cheap and on both their deaths any balance goes to family as per their will.

While that may be the case with the commercial variety, there are a number of over 55 developments run by charities which seem to work quite well (Hanover Housing - patron Princess Alexandra for example). The charitable ones tend to be less lavish with fewer facilities but the service charge is cheaper as a result.

They also seemed to be planned better - if the charity can’t obtain land in an appropriate location (walking distance to shops, doctors, bus stops even for someone unsteady on their feet), since they don’t want to make a profit, they just don’t build.

At 73 her health really could go at any time. It makes a lot of sense for her to sell up and downsize to a property she can manage if she starts to get mobility problems etc. I know so many people who have left it until they’re unable to manage and then it’s so much harder to move and it’s a distress move so fewer options. And that’s without the fact that she simply can’t afford to be there.

We have had to make some very difficult house moves due to financial circumstances.

A house is just bricks and mortar. It isn't a loved one. Don't do equity release and don't sell your home to buy your parents.

Your Dad was very, very loved. He is in your hearts not anywhere physical.

You can take pictures of all the rooms in the house and the outside and make a memories book for your Mum.

Sorry if this sounds harsh but I think equity release will cause you lots of problems down the line. If your Mum needs to move into a more accessible home as her mobility declines then she won't be able to unless she is will to rent.

Sympathy for the loss of your father.

It is difficult to come to terms with but your mother cannot afford the house she is living in and unless you have the means to pay her mortgage, she will need to sell it and move. Even then it does not sound like she could afford the bills or the maintenance of the house.

It will be another grief for her and for you, if it is your childhood home.

It is also an opportunity for her to make decisions that will reduce stress long term and find her somewhere to live that will be more suitable with lower maintenance and costs.

Mortgages no longer stop at retirement. There simply not enough rental properties to go round. I'm just looking at buying again at 60.

It’s a valid question though. The OP’s father was younger than her mother. How has the OP’s mum ended up in this situation? Not only with a £180k debt that needs to be paid with no reserves to pay it, but also with no pension provision?

A PP says this:

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.

She’s correct. I took out my first mortgage in 1998, around the same time as the OP’s parents (assuming a 25 year term). Every estate agent was desperate to hustle you into their back room to speak to their in-house ‘mortgage advisor’, who would do the very hard sell on an endowment mortgage. Those mortgages were interest only, and ran alongside an endowment plan which, on maturity, was supposed to clear the outstanding debt. Of course, the advisors would tell you that the value of the endowment would ‘probably’ exceed the outstanding mortgage debt, leaving the mortgage holder with a lovely lump sum to spend on a new car or dream holiday etc etc. There were usually a few abstract graphs to illustrate what would ‘probably’ happen.

I was having none of it, and got a repayment mortgage. The sales tactics were quite entertaining though. They appear to have been redeployed to talking up equity release plans, judging by some of the contributions to this thread from people who clearly sell them! I wouldn’t touch one with a barge pole.

As a PP notes, it was apparent by the early 2000s that the endowment thing wasn’t going to deliver the goods, and many people with this sort of mortgage, including three of my friends, sold the endowment policy. At this point you either switched to a repayment mortgage or buried your head in the sand and thought that something would turn up.

When house prices subsequently started to get a bit barmy, in the early 2000s, lenders began to lend in a fairly reckless way, including interest only without proof of how the loan would be repaid. This includes the notorious ‘liar loans’ (self certification, where you wrote down what you wanted your income to be and nobody questioned it). A friend got an interest only mortgage in 2005. I asked how he planned to pay it off. His answer was, “I’ll just sell the house”. In his view it was a bit like renting, but with potential capital appreciation. The bet worked in his favour, but it was still a gamble.

In other words, there are all kinds of reasons why somebody might have an interest-only mortgage with no means of paying it off. Lenders only got stricter after the 2008 financial crisis, at which point you had to show how you’d pay off the debt when an interest-only mortgage term ended.

Just to let you know that StepChange offer a free mortgage and equity release service. Their staff don't work on commission so they'll give your mum unbiased advice. You can talk to them on her behalf if she gives you permission x

You and your Mum need to take a huge step back.
Selling is by far the best option. Look around at what the best solution is. She needs to be able to maintain what she buys, so a property that is low maintenance, with enough capital to one side to meet this. She is far better doing this now, than scrabbling about after mortgages. I had an uncle who did similar but then didn't have enough to maintain the house anyway and eeked out a fairly shabby many years of retirement.

Meant to add their number! StepChange Financial Solutions +448081686719

Is this a new thing? I've been required to take out buildings insurance to get a mortgage, but never life insurance. (And I've had several mortgages)

OP - I can only echo pp to say that downsizing is really what's needed here. It will be hard, but a more stable and sustainable solution in the long run.

It's certainly not a new thing @AreOttersJustWetCats
My first mortgage taken out in mid 1990s required life insurance. My parents mortgage taken out in the 1970s also required life insurance.
If we didn't take the one with the mortgage provider we had to provide proof of the policy.

Age UK have a lot of useful info on equity release, see here or search 'age UK fact sheet 65

How strange - I've never been required to do this with any mortgage! Does it make a difference if the mortgage is in 2 names? Or if it's repayment vs interest only? (Mine have all been joint repayment mortgages)

Every single time we've had to get buildings insurance (which is sensible), but nothing else.

I understand about not wanting to sell the family home but I want to add to the voices here saying that this is the only sensible option.

My parents have a big old stone house. They’ve had it forty years. We all grew up there. The garden is my mum’s pride and joy. My dad is severely unwell and can’t help with any of the house/garden maintenance. My mum has done a complete about turn in the space of a year. After being adamant she would see out her days at that house she is now saying that it’s too much for her on her own and will move somewhere smaller.

Basically as well as the immediate financial problem OP re the interest only mortgage there’s a sizeable ongoing commitment in staying in a big house alone and you’d need to budget for cleaners, gardeners, handyman etc., rising costs of heating etc.

I worry that you’ll go to all this effort and cost to keep the house only to realise in a year or two that it’s unsustainable for her to live there alone anyway.

I've had joint repayment mortgages for 20 years and have always had to have life insurance.