Equity release

[DtPeabodysLoosePants]

Please could someone advise me how this works?
Mum is 80, good health, interest only mortgage of £90,000 on a house worth £235,000. Don't ask why she's still got that much please, it's been complicated over the years. Only has her state pension as income and would rather we enjoy our inheritance now rather than later and also give herself some money for essential new things like a bed and automatic car.

I've never owned a home so am clueless so any knowledge and advice much appreciated.

Do you know when her mortgage term is due to end? Does she have any other savings or investments or other plan to redeem the mortgage? Do you know how much she is paying in interest now? Is she open to considering moving house to free up equity?

The mortgage term is for ten more years. No savings or anything. Was thinking of moving but decided against it for various reasons so is looking at equity release instead to free up money.

What would happen if she needed to pay for care in the future ? I think with that kind of mortgage equity release is never going to be a good idea.

How much is she looking to release? It's just that it's an expensive way to raise capital and she may not actually be able to get as much as she thinks she can from it, especially given the existing mortgage. Moving may be a more suitable course of action, depending on her overall objectives.

I would think that it is not a great idea as she will still owe the £90K when her mortgage ends because she has not repaid any principle.

You also need to think of her future needs. What would happen if she needed care? It can happen very quickly at her age. My Mum went from very fit -living alone, driving her car, participating in hiking and hill walking groups to needing, firstly 4 carer visits/day to needing 24 hour care in a period of less than 12 months. The good quality care homes we visited were all over £900 per week and none of them would accept a new resident on the Local Authority rate of £590. The Local Authority may also refuse to fund her if she has intentionally given away her assets.

Don't do it. She will be refused LA care if she gives her assets away. You might also need to sell her house at some point to pay for care for her. Also, with the mortgage being interest only, that £90k will need to be repaid.

So you're looking at £145k of equity here. By the time all the fee's are added on and they make a buffer for any sudden devaluation in the house, your mum won't get a lot at all.

She would be wise to move somewhere smaller, pay off the £90k mortgage so she's not wasting money every month paying mortgage interest and keeping back some money for a car and other expenses.

I wouldn't take anything from her now, she doesn't actually have much to give. Wait until she's gone for that

1. How has she got a mortgage of £90,000 age 80? Repayment or interest only? What is the term? How will she repay it?

1. At her age giving you nay money may be seen as income deprivation and if she was to go into a home you would have to pay- so do you have £1000 a week until you have paid the equivalent of what she has given away?

1. With a £90,000 loan already where is she going to get the cash from? Equity release is usually for part of the house value and she owes already ?

1. What is she going to do in 10 years? How will she repay what she owes when the mortgage term ends?

She needs some financial advice and being able to give cash away is a pipe dream. She would probably be best downsizing now into a home that she can own mortgage free.

She's not able to move and just wants a small amount of the equity, about £10,000.

That £10,000 may cost her many times that amount but doing the equity release once the company's fees for surveys, legal work and interest are added - either she will be taking out a loan or lifetime mortgage that will need to be paid or she will be selling a percentage of her home.

Does she have insurance to pay off the mortgage if anything happens to her? Equity release is unlikely to be the right thing in her situation and the 10k will end up costing a lot more than 10k.

Goodness, it's more complicated than I thought. No insurance. Could she get some? Or is it too late? The plan was always that the mortgage would be paid out of the sale of the house on her death.

Has she asked her current lender if they are willing to lend her the extra £10k?

Why or how does someone have a mortgage at 80, because it doesn't make financial sense ?

HadT0Cancel maybe someone was screwed over by her abusive husband who had all the marital assets in his own name then left them in his will to someone else when he died. This happened to my friend's mum. And apparently the fuck up that her lawyer made about this was denied by the firm

No don't do equity release, especially for a small sum like 10k. The fees and interest payments are huge. It's certainly not a good idea to equity release so you can have your inheritance early!

Assuming that she has no dependents living in the house, she doesn't need life insurance. If she dies, the house will be sold and the outstanding mortgage paid off. Assuming she's retired and receiving a pension, she can't lose her income if she's too ill to work, so she doesn't need loss of income insurance either.

Agree that equity release is not a good idea just to give money as an inheritence.

So it sounds like her income doesn't cover her basic expenses and/or give her the lifestyle she wants?

The only 'sensible' options would be either to downsize, pay off or reduce the mortgage and reduce her outgoings that way, or look at the possibility of remortgaging, which is unlikely given her age, but this is starting to change due to longer lifestyles and lenders waking up to the fact, that pensioners do have a secure income and can often afford a mortgage, and if they die, the house will be sold to repay the mortgage anyway, so they will always get their money back.

What is the interest rate on the mortgage? If it's good, the monthly interest charge could be relatively small, but if it's high for any reason, such as SVR, non standard product, then that would be a bigger incentive to look to change the situation.

Has she checked she's getting all the pension/income she's entitled to?

If her only income is state pension she might be entitled to pension credit. She also might be entitled to help if she has mobility problems or needs help at home (attendance allowance?). So worth looking into this as would also help, even if she can't change the mortgage situation.