Equity Release or is there something better?

sarah7697

Hi,

My Mum and Dad need to raise some capital but have no income. They have a mortgage free property so are considering equity release.

Is this a good idea or are there any better options? They are 63 & 65 years old respectively.

Thanks

Robert_Sterling_3

Hi Sarah

As they are "old age pensioners" or if you prefer it "Senior Citizens" how does it come about that they have no income?

EdInvestor

sarah7697 wrote: »

My Mum and Dad need to raise some capital but have no income.

Which is it they need, capital or income?

sarah7697

Hi, sorry - they do have state pensions but have no spare income to afford any repayments. It is a lump sum of money they need, not a regular income.

I've seen a few posts on here where people seem negative about Equity Release, but it is what they are planning. If there is a better alternative I would like to know so they can look into it.

Thanks very much

stuarthouse

Hi Sarah

If i may, my burnt finger advice is NEVER to increase borrowing, ALWAYS to REDUCE debt.

Can your parents downsize ... selling their home, buying something smaller, gives them money debt FREE, repayment FREE, worry FREE ..

becuase if they take a loan
1. saddled with debt for x years .. so from debt free they have gone to indebted
2. if the debt is secured on their home and they cant repay the debt, the will loose their home
3. worry they can do without.

sarah7697

Hi Stuarthouse, I know you are right, but for the argument's sake, can we please assume that they have no choice but to raise some capital. The situation is very complicated and would need to me to post personal info about the situation that I'd rather avoid. I guess my question is that if someone at the age of 63 & 65 has no choice but to raise some capital for something and has no spare income to pay repayments, what is the best of all the worst options!

stuarthouse

sarah7697 wrote: »

if someone at the age of 63 & 65 has no choice but to raise some capital for something and has no spare income to pay repayments, what is the best of all the worst options!

Hi Sarah

I am sorry to hear of their situation.

Its tricky if somene cant repay the loan, becuase they have living costs and £££ a month loan repayment.

I honestly dont know, i would say however Please do NOT get a loan secured on the property.
If a loan is to be taken, then an UNsecured loan just enough to cover current & future possible needs,
then if repayments cant be made, the low credit rating passed on them is meaningless as they have already paid off their home.
It may go to court, in which instance the CCJ would possibly be in their favour given their cicrumstances,
and the ruling could may well be to pay off what they can aford per month.

At least this gives them time to possibly look toward house sell, downsize, have more debt free money at hand.

Robert_Sterling_3

OK Sarah I assume there is no other way.
Then yes look into Equity Release.
Your parents are relatively young old age pensioners.
What this means is that they will get a relatively low % of the equity released on the assumption that there is no mortgage. They will not have to pay any back. The lender will get back the amount of equity he released to your parents with compounded interest at the time of the second death as far as I know.

I know the basics of equity release but do not about it in detail. I think it is a "Last Resort" type of loan. OK for a single person with no dependants.

Search the Web for further details of Equity Release.

This is just an amateur opinion and is not in anyway financial advice

Gazza1964

Hi Sarah,

I have spent many months trying to find a way to help my parents who are in a similiar situation to yours.

In the end we remortgaged and lent them some money so that they could leave doing equity release until a later date as the equity release firms are not too bad if you dont intend to stay in the property more than ten years although they are by no means good. In the end my parents went to a ship certifed firm who after taking them down the road of solicitors and valuations then told them they could not have the £15k they had asked for till they spent 3k on upgrading the property.

Please bare in mind that these firms will require you to have all necessary certificates in place so that they dont have to cough up any of their own money to sell the place when they get their hands on it. Something they dont seem to tell you until the last minute.

I hope you find a way to help your parents, personally with rates being so low at the moment i may remortgage again on a fixed rate and they can pay me back when they sell up.

gazza

koexelek

Robert_Sterling wrote: »

I know the basics of equity release but do not about it in detail. I think it is a "Last Resort" type of loan. OK for a single person with no dependants.

Correct.
It should only be considered after all other options have been exhausted.

However, utlimately, it is the beneficiaries that lose out.
Doesn't matter if you have a billion pounds of equity in your house, or none at all when you die, you can't take it with you.

Sometimes, in this situation, mum and dad take out a loan or mortgage, but the children make the repayments on their behalf to protect their own inheritance.

sarah7697

Hi koexelek,

Thanks very much for your answer.

I am the only beneficiary and am not bothered in the slightest if I inhereit nothing other than a few personal items. Unfortunately I can't afford to remortgage (like another poster's suggestion) so it does seem that Equity Release is their only option.

In the event of both of their deaths, would the equity release companies act like banks foreclosing on a mortgage? In other words would they sell the house off as quickly as possible for a lot less than it's worth to get their money back quick or would I be able to take control?

Thanks