Equity Release

m1tch

I am investigating the possibility of equity release for my mother aged 65. I have looked at the different types of product and think that a flexible lifetime mortgage would be the most suitable. Initially we have worked out that she would need about £12,000 capital up front, followed by say £5000 every 3-5 years for general living expenses. The property is currently valued at around £110,000. The flexible mortgage products seem to be designed for this and interest (at around 7% APR) is only paid on what she has actually borrowed. We also like the fact that she gets to keep her home in her own name.

My question relates to early repayment charges? Most of the companies I have looked at don't seem to mention specifically about this, and seem to assume that the loan will only be repaid upon the sale of the property (presumably when you die or go into long term care). I'm not sure that I like the sound of this, who knows how circumstances may change! Also the amount of the loan plus the interest quickly builds to large amounts over the years and I would feel happier knowing that it can be paid back. Does anyone know of any policies with zero (or low) early repayment charges? Also I would be interested to read if anyone has any other suggestions for this type of situation.

Thanks

Jake'sGran

This is something I would never consider. Is your Mum having a difficult time? Has she claimed all the allowances she might be eligible for? You don't say how old she is but a few people I know who are in their 70s like me have moved into Council property after selling their houses and using the capital to provide some extra income or, if they are in poor health, just spending it. They all seem to have lots of holidays.

The amount these companies will offer depends on so many things, value of the property, life expectancy etc. It's all designed for them to make a profit. Also, you don't sound convinced that this is a good idea. Do more research - just Google Equity Release Schemes - and then find a different way of raising more money for her.

Jake'sGran

https://www.thisismoney.co.uk/mortgages-and.../article.html

I am not very good at links but you could try clicking this or enter it into your browser. The page that came up when I put the question in Google had lots of articles on the subject.

margaretclare

The first stop for anyone looking into equity release should be the SHIP website: https://www.ship-ltd/org (SHIP = safe home income plans)

So many factors come into play here, and we are all different. DH and I did this a few years ago just because we wanted to pay off the original mortgage - didn't fancy paying a mortgage until we were 83. Also, interest rates have come down so the interest charged now is very low. However, it's not a step to be taken without a lot of due thought and consultation. We didn't need it purely for income, although we were happy not to have £260 or so a month going out to a repayment mortgage. If your Mum needs it for income, remember that taking this step could make her ineligible for certain means-tested benefits e.g. pension credit.

homejames

When releasing equity from your property it's essential that you choose a plan that fits your individual needs. You should always seek advice from an independent equity release specialist. They will research the market for you and guide you through any decisions you will have to make. Equity release schemes can offer many benefits however you need to be aware of what impact releasing equity will have on your estate over time and whether or not your entitlement to means tested benefits could be affected.

yelf

some have a 5 years ERC period, reducing from by 2% a year from 10% initially. Others are based on the movement of 15 year gilts, or the bank of england base rate.

One provider's ERC is based on any decrease in the BOE from the date of the plan start - so basically there will never be any ERC as the base rate wont go lower than where it ia.

When you get a KFI quote it will detail all of this.

As for the comment of saying dont lok at equity release at all? laughable, it is a very good option for lots of people.