Extricating DP's from their costly equity release scheme - confused!

[Ihaventgottimeforthis]

I've got a complicated situation - DP's (in their 70's) with an equity release agreement covering two properties (one they live in, one is holiday let for income) we all (DPs, me DSis) want to pay off early so Dsis and I aren't faced with a massive bill and the prospect of losing the properties when DP's pass away.
We're thinking about whether DSis & I can secure a joint BtL mortgage to pay off the loan, if DP's gift us the properties. But catch 22 of we can't get a mortgage against the properties to pay off the equity loan until they belong to us, but we can't be given the properties until the equity loan is paid off.
I already have a mortgage, DSis is looking to buy a house. Both of us have savings (that we'd rather not dip in to, but that won't cover the entire repayment anyway).
AND DP's will need to keep on living in one of the properties, and need to replace their current meagre income from holiday let (some of which will now be used to pay off mortgage), with a stipend (?) from me and DSis
I'm getting so confused. And that's before even considering tax implications.
Is there a simple solution out there we are overlooking?!
Obviously we're going to get some financial advice, but a discussion would help me consider some options and get the situation straight in my head first! Any thoughts/experiences welcome!

What have they done with the equity release funds? Did they understand what they were doing? There has been some noise about equity release being miss sold... [Although I am pretty suspect of people claiming they didn't realise what they were doing. Didn't care to make any effort to thin about consequences more like.]

What are the terms of repayment for the equity release mortgage?

As far as I am aware, you wouldn't need to own the property before securing a BTL mortgage, you could treat it as a 'normal' BTL purchase and on completion the funds would transfer to your parent's solicitor and repay the mortgage.

Lots of issues here though:

• Selling at MV?
• IHT
• Deprivation of capital for care home costs
• How will you secure the BTL mortgage if you aren't getting any rental income form your parents?
• Legal issues that come with being a landlord (which you are, even if its to your parents)
• Extra stamp duty on the purchases
• Tax on any rental income from the holiday let
• Joint ownership with your sister complicated things too

You really need specialist advice from someone who understands all the circumstances and nuances of the situation and can talk you through options.

They used the money from the equity scheme (it was a lump sum) to finish the conversion of the second property, so it could be let out.

I don't think it was mis-sold as such - my DSis and I weren't really involved in the decision even though we knew it was going to come our way in the end, when DP's die or go into care. I think from DP's perspective it was this is our last chance to achieve this dream, let's go for it and cross the bridge of repayment later.

To be honest, the worst case scenario is that we let the agreement continue and then sell the properties when the agreement expires. The reason I don't want to do that is the properties are lovely, have sentimental value now as they've been there for twenty years & DP's restored them themselves, and it is a future potential source of income for me and DSis.
Another complication is that there are two barns on one property, and the agreement covers both. I guess we need to see if the equity lender will let us split the properties up! When the loan was taken out, one property was derelict so that's why both were used as equity. Now they're both complete, in theory only one property might suffice as security? Dunno if that's how it works!
Just even thinking about it makes my brain go fuzzy.
Next step - find a financial adviser!

Thank you for your response btw SushiMonster :-)

it's 6% interest a year, repayable when DP's are both dead or move into permanent care. So it is stacking up very quickly, and DP's are not repaying anything. But even over ten years, it has almost doubled the original loan amount.
Thank you for your points, more to consider but we mustn't make another rushed decision! Who would have thought owning property could be such a burden

The earliest ER schemes were a huge racket and I think many of them have been quietly settled behind closed doors. Later ones are a bit fairer (relatively speaking) and not quite so dodgy. It's worth simply googling "

That's not a bad idea ShotsFired, thank you - they may be inclined to be 'helpful' with us paying it off if the terms wouldn't bear up to much scrutiny ten years later!
I don't have an issue with them making money out of it - it did seem at the time to be the last resort and if we hadn't have been able to find the money we wouldn't have the lovely properties we do now - but if they can at least make it easier for us to put in place alternative financing that would be nice.

Otherwise it's EuroMillions I think.

My DF also took out an equity release on similar unattractive terms.
Your circumstances sound complex.
You might want to consider getting financial power of attorney so you can act on your parent's behalf - the company won't talk to you otherwise.
These schemes often come with punitive early redemption costs so look into that first.
The company my DF used recently got in touch with a message that interest rates were at a historic low and it might be possible to refinance - obviously with the cynical view to get the loanee to borrow more - but there may be an opportunity to pay less if you weigh up the options.
You might be best getting them to refinance the equity release with the view to you all purchasing the holiday let and the equity release continues on their home - it sounds like you won't have enough to cover the full amount...?

The company have told us exactly what we'd need to pay if we wanted to get out of the agreement early, this year. It's not as bad as it could be!
We've got so many plates spinning with this, I just don't know.

PoA is an interesting one, I'll look into it.

We have an initial appointment next week with a FA, so we should get some official guidance.
It truly is complex!

You can do a 'family purchase', via solicitor. You may need to raise the initial mortgage to pay off the equity release against yours or your sister's residential property. Then remortgage to a standard mortgage on your parents property