Equity Release Help

yorkshirelass3

Hi. Some advice needed. My Father took out a lifetime mortgage on his house in 2007 at the peak of house prices. He recently died, and his house is now probably worth at least 50k less than their 2007 valuation, and clearly the equity release company want their money back. With other debts, and fees it's going to leave very little left, and I need to buy somewhere for my Mum to live too. The debts were his debt, not 'their' debts so require settling on his death.

Given the amount of interest and fees stacked onto the original loan, is there a way to challenge a valuation from 4 years ago when prices have dropped so much over the years? Anyone got any advice from experience with equity release?

Thrugelmir

yorkshirelass3 wrote: »

is there a way to challenge a valuation from 4 years ago when prices have dropped so much over the years?

The valuation has no bearing on the fact that your father withdrew equity from the property. The purpose of the valuation is to confirm to the lender that the property represented adequate security for the advance.

Any number of issues could impact a property's value not just general market movement.

kathleenryd

Did your mum sign away her right to the house. Usually the loan is repaid on second death. Sounds a bit dodgy taking ER and leaving one spouse homeless. Seems unethical on behalf of the ER company. Who are they - can you challenge charge?

Thrugelmir

kathleenryd wrote: »

Did your mum sign away her right to the house.

Reading the OP's post, the property was only in his fathers name. So his father could as he wished with the property.

kathleenryd

Still unethical.

yorkshirelass3

kathleenryd wrote: »

Did your mum sign away her right to the house. Usually the loan is repaid on second death. Sounds a bit dodgy taking ER and leaving one spouse homeless. Seems unethical on behalf of the ER company. Who are they - can you challenge charge?

They didn't live together when the policy was taken out. Mum moved into the house literally a week or so before his death

kathleenryd

yorkshirelass3 wrote: »

They didn't live together when the policy was taken out. Mum moved into the house literally a week or so before his death

Does she have any rights to the house.

holly_hobby

The valuation carried out as part of the equity release/lifetime mortgage woud have been based on the achieveable value on sale of the property, exactly as it is for a standard residential mortgage, so it would be most unlikely that it would have been overvalued by the surveryor.

Further to which, it appears in accepting the valuation that your Farther was happy with the quoted figure for the property, and the amount of equity he was able to release based on this figure. Therefore if you seek to claim the surveyor made an error, and that the property was really worth significantly less than the fig quoted at the time, you need to also consider how this would this have impacted on the sum released to your Father - no doubt it would have either significatly reduced the sum, or possibly (based on the fitgs/age of app) have even excluded the possability of any capital release at all.

Lifetime mortgages (not home reversion schemes), operate by equity being released, with no repayments made during the lifetime of the individual or until the enter into longterm care. Instead, the interest charged on the loan is simply rolled up on the debt, repayable at the point of redemption (in this case the passing of your Father).

This is where the problems lay for families when this type of arrangement is sought, as whilst one should always ensure the scheme has a "no negative equity" promise - the accumulation of interest on top of the original debt can wipe out any equity at all, if the market drops.

Unfortunately, it appears this is the case you have, the market especially for larger properties has fallen dramatically, largely driven by the reduced availability of mortgage borrowing (due to tighten criteria & specialist lenders leaving the market).

The valuer based their valuation on market conditions at the time, unfortunately like us all, they don't have a crystal ball to predict unprecedented financial issues and market downturns, and the worst recession since the 20s - which is I suggest, what this arrangement (and others from the time) have unfortunately been caught up in.

In my opinion there is little upon which to base a successful complaint - I feel despertely for your Mum, but I do assume that she was fully aware of/benefited from the equity release when it completed, as I say the unfortunate fact that the property market has fallen is somewhat out of the surveyors hands, as it would be his opinion of value that you would be challenging.


Hope this helps

Holly

PS -
To also answer the current question, if mum was not on the deeds, the equity of the property (after repayment of any mge) goes into dads estate - which is then apportioned as per his will or intestatcy laws. If Mum & Dad were divorced that causes further issues.

Thrugelmir

kathleenryd wrote: »

Still unethical.

Always advisable to ascertain all the facts before making judgement.