equity release - are they still available?

dollarhound

Hi all,

Just a quick question on behalf of my parents.

They have no mortgage on their property and are pensioners (state + private)

The question is; is it possible to borrow on the strength of the equity on their home to buy a place in France?

If so what type of mortgage/loan could be most suitable? (and does anyone know of any star buys? - so to speak)

Ideally they would like to pay interest only on the amount they borrow until they pass away (horrible but happens to us all!). I know that when that happens the estate will pass down to myself but I have no interest in living in their home so would look to sell it and clear off any loan/mortgage and keep the place in France as a holiday home.

TrickyDicky101

I may well be wrong, but I would presume they won't have access to 'normal' mortgages due to the unspecified repayment term. This would leave reversion plans or lifetime mortgages. If they go this route they are very likely to be severely restricted as to the amount of cash they can generate from either option as they are not really set up for the situation you describe. A reversion would involve your parents selling an interest in their property to the finance company but paying no interest. A lifetime mortgage generally involves the finance company extending a loan secured to the property and interest rolls up on a compund basis until (usually) they pass away and their estate settles the outstanding capital + interest. Either option would only provide your parents with a fraction of the value of their home.

Have they considered downsizing thereby realisinbg the full value of their current home and reinvesting the proceeds in the holiday home and in a smaller permanent home to live?

Incidentally, I would never take out a lifetime mortgage if I could but avoid it.

McKneff

I'm interested in this too so look forward to any answers

Annisele

In principle it's possible - but it's not necessarily a good idea.

How old are your parents, what is their income, what is their UK house worth, and how much would they need to borrow to buy the French property?

yelf

The options are:

1) A lifetime mortgage where they take out a loan against the house. They can choose to pay the interest if they wish, otherwise go for "gross-roll up" where by the interst accrues and is taken out of the value of the property on death.

2) Aa home reversion plan where they sell a percentage of the property: thereby having no interest to pay. The mortgage provider then gets any capital growth on their percentage. This will provide a larger initial sum than a lifetime mortgage.

3) The Halifax retirement plan: a mortgage which can release 90% of the value of the property, but the interest rate must be serviced.

The older they are the more they will get. You have to use an IFA to do this: no providers will dela direct due to the risks.

However, baring in mind the affect the loan will have on their main residence (if using equity release) this wouldn't make much sense to me. The Halifax option is probably best imho