Equity Release- ways to pay back

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DH parents recently took out an ER scheme (they are late 70s early 80s) and DH thinks it will be possible to keep the family home and repay the debt (assuming they don't need to care home facilities) by taking out a new buy to let mortgage to pack back ER company in the future.

PIL have reasonable health and could live another 20 years! I just assumed people sell the home to pay for this kind of thing.

I am confused, will it be possible to get a buy to let mortgage for just the value if the debt? I am assuming we would need the usual 25% cash deposit, rental income projections, usual landlord requirements and additional stamp duty.

sorry posting here for more advice

DH’s parents only just done this (last few months).

We got talking and DH seems to think if for example 100 grand (house currently valued at 750k which needed to be done to access the ER loan) is owed he could get a mortgage to pay this back.

The whole situation was very stressful but I really commend his parents for including him in the process. DH would like to keep the home in the family but realistically he is not thinking if the cost implications and responsibilities of being a landlord. He is not a high earner though has potential to be one, not particularly good at saving and may even try to use our joint savings to repay any debt just to keep the house of it came to it.

I am confused. You and your H are thinking about getting a mortgage for a buy to let in the hope of attaining the amount of the ER?
Are you aware that the ER goes up all the time and what starts as a small amount may end up quite high?

OK you just added another post.

Why did they need 100k?

Are they moving out of the home to enable it to be rented out? If so where will they live?

Sorry this is all hypothetical/thinking ahead sort of…
My DH thinks that assuming they do not need care/care home fees and were to pass away he could then obtain a fresh mortgage in his name to pay off the ER company. 100k was just an example figure that the debt could grow to. As far as he knows they have taken out only a small amount but could take out more.

They won't give you first offer at the price they paid out. They'll want open market price for the house.
The time.to discuss all this was before they did the ER.

OP, I'm not an expert but in my experience (extended family), when the homeowners took out ER it effectively meant that the home belonged to the ER company at their death. There was very little left after the debt was recouped, and that was without any care home fees paid at all.

Now that this deed is done, I think your husband should get some specialist advice but should also realise that it's very unlikely that the home can be kept in the family.

Harsh but it really depends on when they die
If it is years away then the debt could be very high. It works on compound interest and a very small initial debt can increase hugely over the years.
As for remortgaging the property to a btl once they die. This may be possible if lenders at the time will allow capital raise to repay the ER but it all depends on the time to be honest

Apologies I mis-understood, I thought you wanted to clear the debt now.

You really need to see the conditions - how much is the interest rate, is there a certain amount of equity protected etc etc

If you are able to pay the debt off sooner rather than later that would be better

Like a PP said, its compound interest, and normally with ER you dont pay anything off until death / sale of house

Did they get financial advice?
www.moneysavingexpert.com/mortgages/equity-release/

www.thepropertybuyingcompany.co.uk/news/post/equity-release-horror-stories-whats-alternative
Another one of the common equity release horror stories, is equity release lenders placing high early repayment fees to discourage borrowers from using them as a short-term lending facility.

I know someone whose parents took a £10,000 equity release and the amount owed is now over £80,000 (after 10 years) and rising daily, the house is only worth that amount or slightly over.

I would aim to get this paid off as quickly as possible and not wait till they have passed.

Thanks
I believe DH discussed this extensively with PIL and though he wasn't entirely for this obviously wants his parents to enjoy retirement. Whilst I don't know the actual interest rate I understand from him that the projection suggested the amount would double every 10 years and that 50% of the value of the home will be protected.

I think he is expecting to use savings/investments to pay off ER company in future which I am against really. The alternative was another buy to let mortgage for the amount owed.

I understand the amount borrowed is around 30k and the house is currently worth 750k

I don't have much experience of this, but my Dad died in November, and after less than 3 years, of the ER being in place he/we owed about £23k on his ER. We paid it off as soon as we could because the interest goes up at a frightening rate.

Could you make monthly payments now? Like a mortgage. It would keep the interest payments down.

I'd also look at miss selling. It's time barred so don't wait too long.

Why does he want to keep the house? Does he intend to move into it? All schemes are different so you need to consult with them first. I don't see the sense of buying another property to generate some income to pay off the ER. It doesn't make sense.

Jeez this sounds like a very bad deal and the ER should probably be unpicked if possible. On the BTL front most lenders do have an age limit although it's much older than residential mortgages. You can't live in your own BtL and relatives living there might be problematic too - one to check with the lender at the time.

If it’s a recent deal then it’s probably a simple lifetime mortgage. If your H is the only one to inherit he could keep costs down by paying the interest so that the debt doesn’t go up.

pointless to think too much about keeping the house or using it as a buy to let as there are far too many variables.

if he wants a buy to let if doesn’t need to be his parents house.

Just realised this is an old thread, not sure how to delete!