Re-Mortage as an alternative to Equity Release

toocan

My dad who lives alone and owns his house is looking to release some equity from it (estimated value being around 200k)

The idea is that he would re-mortage half the house (100k) and put 40k into an account from which to Direct Debit the mortage payments then have 60k left over to spend how he wishes.

He doesnt want to go the equity release route as he wants to leave us (me and 2 siblings) something when he passes

is this the best route outside of downsizing?

VIGILANT22

Downsizing is always the first option discussed when considering ER (Equity Release).
You don't say how old yr dad is....
What your suggesting above is an interest only mortgage forever ......however you're suggesting debt would service debt....
SIMPLE CALCULATION
Releasing 100k on a rate of 5/6% Interest Only would be approx £500.00pm
40k / £500 = 80 monthly payments = 6.5yrs....after 6.5 yrs how would he service the 100k debt?

Lots more involved and too lengthy to go into here...best taking the advice from an advisor who is ER qualified.........then you can make informed decisions Re downsizing/ER........

CLAPTON

maybe his children might be able to help him a little

toocan

CLAPTON wrote: »

maybe his children might be able to help him a little

Its not that he needs the money he just wants to release some capital to enjoy in the final years of his life. going on holidays etc. If i had the money i would be gladly give him it as it stands id rather him be able to spend/enjoy what he can rather than him sit on a house and me inherit it.

VIGILANT22 wrote: »

Downsizing is always the first mattered discussed when considering ER (Equity Release).
You don't say how old yr dad is....
What your suggesting above is an interest only mortgage forever ......however you're suggesting debt would service debt....
SIMPLE CALCULATION
Releasing 100k on a rate of 5/6% Interest Only would be approx £500.00pm
40k / £500 = 80 monthly payments = 6.5yrs....after 6.5 yrs how would he service the 100k debt?

Lots more involved and too lengthy to go into here...best taking the advice from an advisor who is ER qualified.........then you can make informed decisions Re downsizing/ER........

Hi my dad is in his 70's

regarding the mortage an interest only mortage would work out about 160 a month with a fund of 40k / 160 = 250 months = 20 years.

isnt this the same as what the ER company is doing except your negotiating a better rate by doing it yourself?

VIGILANT22

Where are you going to get an interest only mortgage for 100k at 160.00pm for 20 yrs??.......I cant think of any lender who would allow 100k to be released & 40k of that for servicing the debt...

Re ER...Sorry, I meant if you wanted obtain full info on ER...I didn't mean apply for the IO mortgage with them...

gizmo111

Where is he hoping to get a rater of less than 2% for 20 years?

toocan

VIGILANT22 wrote: »

Where are you going to get an interest only mortgage for 100k at 160.00pm for 20 yrs??.......I cant think of any lender who would allow 100k to be released & 40k of that for servicing the debt...

Re ER...Sorry, I meant if you wanted obtain full info on ER...I didn't mean apply for the IO mortgage with them...

I think theres 2 questions there if im right
1) the rate i had a quick look at was 2.6 (via first direct) not 1.6 sums are out your right
2) are you saying a lender would not allow the motrage based on the money being used to service the debt. if so i guess it makes this idea completely redundant

gizmo111

Any money lent would be based on affordabiltiy and not many (if any) will lend after age 70. Also you are assuming the rate will stay the same and not taking into account rate increases which there almost certanly will be over 20 years.
My dad wanted to do something similar, but I raised a BTL mortgage on the house and had to take full responsibiltiy for it which was fine as he got what he wanted.

VIGILANT22

Very few lenders will lend into retirement unless their is some income to cover payments ie pension etc...some don't even consider investment income as income...so they would never allow debt to service debt....

Re rates ..do you seriously believe a current rate of 2.6% would remain at that level for 20 years????????

VIGILANT22

gizmo111 wrote: »

Any money lent would be based on affordabiltiy and not many (if any) will lend after age 70. Also you are assuming the rate will stay the same and not taking into account rate increases which there almost certanly will be over 20 years.
My dad wanted to do something similar, but I raised a BTL mortgage on the house and had to take full responsibiltiy for it which was fine as he got what he wanted.

Do you mean you took ownership?!

toocan

gizmo111 wrote: »

Any money lent would be based on affordabiltiy and not many (if any) will lend after age 70. Also you are assuming the rate will stay the same and not taking into account rate increases which there almost certanly will be over 20 years.
My dad wanted to do something similar, but I raised a BTL mortgage on the house and had to take full responsibiltiy for it which was fine as he got what he wanted.

very true im sure the rate will fluctuate its more a question of "what is the best option to release equity" your BTL mortage sounds interesting did this work out better than what a Equity Release company offered? If you could provide a brief outline it would be superb