Remortage at 73... is this the best solution?

toocan

My dad who currently has no mortgage is wanting to help myself and some of my siblings out with a gift of 10k each (which is an amazing gesture!)

He has spoke to an IFA and the IFA has suggested the best route would be to take an internet only mortgage for 60k of the value of the house (the house has been valued at 245k but in reality would sell for 200k in this climate if he could actually find a buyer! he owns the house at the minute in its entirety and has no spouse). The mortage would run until he was 85.

My dads monthly income is 2k with around £650 outgoing each month. The interest only mortgage (at current base rate) would be around £170 a month. The remainder of his income he would bank and then at the end of the year use some of it too repay a lump sum (say 5k each year) off on the mortgage

Is this the best solution for him to do what he wants to do? are there any other options?

Thrugelmir

Has the IFA suggested a lender who would be happy to advance an interest only mortgage for your Dad?

holly_hobby

I am assuming that the IFA (is he a suitably qualified mge broker ?) and has already:-

• sourced lender(s) whom will accept an unencumbered (mge free) remortgage
• whom will accept the basis of remortgage (releasing equity to give to his children)
• that the proposed lender(s) is/are happy both with your fathers age, proposed term and source of income ?
• what is the intention for repayment at date of redemption - assuming the extra lump sums he intends to pay (must be within lender permitted paramaters - so going on SVR may be best) does not erode the whole debt.

If your IFA hasn't actually placed the mortgage with anyone, but instead just given his general assumtions, I would really suggest you get something a little more concrete, as there will certainly be issues with this for the reasons noted above.

(also consider PET/IHT issues should total net estate, on death of the Donor within 7 yrs of gift, exceed nil rate IHT band - which is currently 325k until 2015)

Hope this helps

Holly

magpiecottage

There are a number of things to consider here.

First of all, is this adviser qualified to advise on "equity release". Ask to see his certificate. This will almost certainly be the Certificate In Equity Release (CER) awarded by the Chartered Insurance Institute (CII) or the Certificate in Regulated Equity Release (CRER) awarded by the Institute of Financial Services (IFS).

It is possible that he has instead got the Advanced Certificate in Mortgage Advice and Practice (AdvCeMAP) and taken the CRER as the last exam in order to get it. If so, he should have a letter from the IFS to prove this.

Moving to the actual advice. Taking a loan to give money to you is very nice for you but what purpose does it serve?

Is there a specific need or, to borrow from George Best, will you spend it on wine women and song before squandering the rest?

If he simply wants to enjoy being there to see you enjoy it than that is a good reason but he needs to understand it.

Also, what happens when he reaches 85 and the lender wants the money back?

Will his income continue indefinitely?

What will happen if he goes into care? How might this affect his entitlement to state benefits (positively or negatively)?

magpiecottage

holly_hobby wrote: »

s
(also consider PET/IHT issues should total net estate, on death of the Donor within 7 yrs of gift, exceed nil rate IHT band - which is currently 325k until 2015)

IHT should not directly affect it unless other gifts within the last 7 years have been made, as well as there being a corresponding debt.

It is of course possible that the remaining estate may be subject to IHT but the gifts seem most unlikely to be and even if they were the charge could probably be met out of the remaining estate since there would be around £200K equity in the property.