Equity release advice needed please

RAMBO_2

Hi all,


My parents are currently going through a divorce and are in the final stages.

My dad wants to keep the house if he can and has tried everything to get a mortgage but cant get one due to his age (66).


He needs to find £47,000 the house is worth £100,000.

With him being 66 he can only get £35,000 with him only being able to borrow until he's 75.

So the last option wold be equity release.


Can anyone tell me the cons of equity release and would you say this is a good idea in the current situation? because of his age .etc .etc?


Also how does equity release work?....can he borrow the full £47,000 as a lump sum or not?


He is currently looking for an adviser who deals with equity release but i thought id try here first.

Any help/advice would be much appreciated.


Many thanks

happybroker

unlikely to get that much I would think though I don't advise on those schemes (tomorrow's endowments??).

not all lenders limit him to 75, provided he has an income for life he should be able to go well beyond that.

RAMBO_2

Ok thanks

Do you know of any lenders who will go past 75?


Thanks

Rednoseranter

Your looking for a lifetime mortgage - borrow a sum, not required to make repayments, interest accrues and mortgage is repaid when he dies/goes into care.

The problem is your dad is quite young, lenders work out how much they will lend based on two things, house value and age of the borrower - if the borrower is young, the likelihood is that he will live for quite a few years beyond borrowing the money and there is an increased chance that the rolled up interest (total debt) could be worth more than the selling value of the property.

Many lenders now have a promise that the debt will never exceed the house value - this means that they are more conservative in the amount they initally lend in the first place.

You/your dad need to get proper specialist advice from broker that specialises in these type of mortgages and their implications, as the lifetime mortgages can have implications for entitlement to benefits / tax planning / inheritance issues etc etc.

margaretclare

We did this in 2003 to pay off the mortgage, which would have continued until we're 83. One of us had to be 68 before we could borrow 25% of the equity. We did this and we're happy with it.

First stop should be the SHIP website (SHIP = safe home equity plans). https://www.ship-ltd.org

HTH

J273

Ok thanks all.

After reading more upon equity release ..its probably not the best option.


Do you know of any lenders who dont limit to 75?...i know nationwide use to allow upto 80+ but no longer and limit to 65.

He's tried quiet a few but all seem to limit to 65:o

Thanks

barose

I am really disappointed with the ER schemes currently available. The interest rates on offer have moved very little since the Bank rates dropped to the floor. The best rate I can find is around 7% (API) which is the same as 2 years ago.

Whenever I see adverts for ER it always shows a happy elderly couple able to use all this 'free' money to better their lives. They never mention the extortionate rates that they are scamming off of the elderly. A similar vehicle on the other side of the financial spectrum, dealing with investing your money, annuities, has seen interest rates floored.

Both vehicles offer the same long term risk and should have similar interest rates. I have come to the conclusion that ER schemes are currently preying on the most vulnerable in society. Could someone offer an explanation contrary to this, I would appreciate it.

dunstonh

The interest rates on offer have moved very little since the Bank rates dropped to the floor.

Not much of a suprise though really is it. Its long term lending by people generally doing it as a last resort and the equity put in place if falling in value. It's not a very liquid investment (to the lenders and their investors) at a time when liquidity is so very important.