Equity release on a property.

John81_2

Hi,

Currently my inlaws are looking into releasing equity on their property to clear the outstanding mortgage and so help ease their monthy bills. I don't know how much they owe on the mortgage.

I don't know a lot about it, or feel comfortable enough to discuss my concerns with them, so I'm looking for some advice.

The main worry I have is that when the house comes to be sold, if it is not worth the amount the equity company are owed, will they hold my inlaws liable to pay them the difference?

I also am concerned that some of the companies offering this are less than respectable as with most things, is the only thing to look for FSA registered?

Thanks in advance.

handytips

I would need to know a number of factors before commenting. How much do they owe on mortgage, property value, age, as the equity that can be released is based on age. There are a number of household named providers in this sector, however equity release is unregulated at the moment.

holly_hobby

This can be a complex area, and disasterous if the adviser gets it wrong - you need a mortgage adviser who is qualified and regulated to advise on lifetime mortgages and long term care.

To answer one of your questions re neg equity - the provider should adhere to SHIP (safe home income plan) recommendations and you should ensure that the provider has a "no negative equity" clause at redepmtion (which occurs on 2nd death or entry into long term care). This is common with most of todays providers.

You also need to be aware by releasing equity, that this may effect any means tested benefits your parents are currently on, or may be eligible for, and may also affect any application for state funded long term care needs they may have.

It is so easy to make a mess of this type of mge, and I've seen some hideous mistakes by advisers who simply aren't experienced enough and/or don't have the reqd knowledge to appreciate the negative impact a true lifetime mge/equity release mge may have on other areas of the applicants financial status - inc how the qualifying status for means tested state benefits/long term care assistance may be lost following such action, and how it will affect their estate and beneficiaries.

You need an adviser who knows the inside out of state benefits, but also lifetime mortgages. I would look for an adviser who has the achieved the reqd skills set and knowledge to meet the benchmark requiements of being awarded the status of "Later Life Adviser Accreditation" if unsure ask them if they have obtained this accreditation.

However, their first action before they start looking at releasing equity, especially if they are doing so to achieve an increase in household income, is to ensure that they are in receipt of all state benefits and assistance they qualify for - if they are unsure the CAB or local benefits office will be able to assess their income & situation and advise if they qualify for any assistance.


Hope this helps

Holly

John81_2

Thanks for the replies.

handytips - I don't know specifics of their financial situation, but given the fact I've a rough idea of when they bought the property and what similar one on their street are and have sold for I can guesstimate the following:-

Owe upto 20k.
Property value roughly 80-90k.
Both 60-65.

I vaguely remember a mention of releasing 25%.

Do either of you mind me messaging you privately to continue the discussion?

holly_hobby

I prefer all discussions to be visual on the forum.

I am unable to recommend a provider, as although qualified to, I do not currently practice in this field - as I now concentrate on compliance & regulation.

If you have a goggle for lifetime mortgages, there should be a number of organisations appear whom your parents may contact to seek qualified advice in this area.

Hope this helps

Holly