Equity Release

[Avebury]

Probably not the right title. House has been owned outright for over a decade due ti inheriting it so have never had a mortgage.

Currently struggling month to month which is likely to continue for the next 5/6 years but then things will be easier.

What is the best way to release maybe £150k from the house to cover a couple of big expenses such as purchasing a new (used) car, having the windows replaced and just to help us day to day for the next little while? House is worth around a million but downsizing not an option for at least 15 years.

a car and some windows won't cost £150k surely?

equity release is not good. it’s an expensive way to operate. why cant you sell now?

Why not just sell the house @Avebury sounds like there’s lots of equity tied up in it?

It’s not just the car and windows it’s other monthly expenses that are increasing for the next 5/6 years. Can’t sell now unfortunately as unless we downsize which isn’t an option for at least 10 years other houses in the area we need to be in are more expensive.
Sounds like a second job might be the only option but we already both work full time.

How old are you?

Can you just take an ordinary mortgage that you repay from earnings? Equity release should be a last resort. The interest compounds& eats up the value of the house in no time.

Late 40s

Do you live in this house? If so, just take out a normal mortgage. Equity release is an awful product for over 99.9% of the population & should only ever be considered in dire circumstances.

You just take out a normal mortgage surely?

You want an ordinary mortgage.

You could look at offset mortgages as the interest will only be charged on the amount owing with savings offset - so you could take a 150k offset mortgage and if in year 1 you had only spent 50k on a car and windows you would only need to pay interest on the 50k (the other 100 would be in the offset account for you to draw down later if you needed it.) You would need to know when the mortgage was due for repayment and have a plan to pay it back by then.

55 is the minimum age for Equity Release.

Thank you. Had not heard of an offset mortgage. Sounds like that might be the way forward.

Equity release is fine in the right circumstances but most lenders would not consider people under 60 years old in any event.
An interest only mortgage, if they are still available, would be the cheapest way.

do you actually need to stay in the area? if you move a mile away to the cheaper neck of the woods could you live there? Thats what i had to do. Move from the naice end of town to the scummy end of town. i wouldnt recommend it but needs must if you’re skint

why are your expenses increasing?

why are you living outwith your means?

is it because of nursery costs or private school costs that you're about to have to pay?

you are both working what's the chances of promotion? or a new job? or both and a move nearer to your new workplace in a cheaper area?

Ordinary mortgage but wonder how it will work with affordability checks if you are using the mortgage to pay the interest on the mortgage and other everyday expenses.

With both of them working full time and currently being mortgage free, on paper they should easily be able to afford normal living expenses as well as qualify for a £150k mortgage even if they're low earners.

This suggests a review of household spending could help with finances.

https://www.moneysavingexpert.com/family/money-help/

But if you do borrow against your house, a normal remortgage and then putting the money in cash ISAs to draw upon (as well as using your personal savings allowances and possibly premium bonds if you're higher rate tax payers) might work out more cost effective as offset mortgages often come with higher interest rates than standard ones especially as your LTV will be low.

But you would need to make sure you pay the mortgage off as quickly as possible especially when your disposable income increases otherwise it will be a very expensive way of financing the car and lifestyle aspect especially.

A mortgage needs repaying though. At the moment your monthly income doesn’t cover your expenses. So it definitely won’t cover your expenses plus the expense of repaying a mortgage.
That might be more manageable if you planned to move in 2 years (you would build up debt spending the amount borrowed on both the windows / car and the interest itself) and repay via house sale. But it isn’t that feasible for 10 years of higher expenses.

You really need to either move (further if necessary, or some compromises on room sharing etc) or cut your costs or earn more money