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equity release

edited 30 November -1 at 1:00AM in Mortgages & Endowments
9 replies 1.9K views
concept2concept2 Forumite
2 Posts
edited 30 November -1 at 1:00AM in Mortgages & Endowments
new to this forum so apologises if this has been covered elsewhere.

i've 2 elderly parents who want to realise some capital from the value of their house. would anyone know what products are available ?

thanks,
paul

Replies

  • lisyloolisyloo Forumite
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    Age concern is a good resource

    https://www.ageconcern.org.uk

    BTW - Downsizing (moving to a smaller house) could work out much better financially.
    Is this a possibility at all?
  • dunstonhdunstonh Forumite
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    you could also consider having members of the family raise the capital to buy a share of the house.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • lisyloolisyloo Forumite
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    you could also consider having members of the family raise the capital to buy a share of the house.

    This is a possibility but I would add a number of cautions here.
    You need to think through all the possibilities (negative ones).

    1) What if the family member needs the money back at some stage. How does that work?
    This would include becoming sick or getting divorced etc.

    2) What if one of the family members dies and their beneficiaries want the money.
    The will of each family member could be changed of course but it illustrates that it needs some thought.

    3) What if family members fall out and they want the money back.

    4) Be careful not to fall foul of long term care regulations.
    If the local authority think something dodgy has been done to avoid long term care fees then they can undo the transaction (there is no time limit).
    This would mean getting proper valutaions to show full market price paid etc. and documenting everything properly.

    Basically I think there needs to be some back up plan e.g. equity release scheme so that family members can be given their money back if they have their own personal emergency.

    Basically I think it fraught with difficult and that's not to mention the resentment someone might feel if they jsut want their money back but don't want to put the parents to the trouble of releasing it.

    Think very carefully before doing that.

    I have been through this with parents and downsizing is really the best and cheapest way in my opinion if they can bear to leave their existing home.
    Costs are fairly small so they get to keep the bulk of the money (unlike equity release schemes) plus there are none of the complications of the above.
  • I can get someone to talk to you if you want - drop me a pm if you are interested, or message here.

    As with any kind of financial advice, it's not as simple a matter as "what are the best products"

    I'm anxious not to appear to be "touting", so if anyone has any specific questions I'm happy to pass them to our guy in the know.

    Regards

    MM
    I work for a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    ( I have ammeded this signature slightly, as I do not actively provide mortgage advice. However, I support and adhere to the moneysavingexpert mortgage broker code of conduct)
  • downsizing is really the best and cheapest way in my opinion if they can bear to leave their existing home.

    this is well worth considering... Also, (and without details of you parents it is really hard to say), there are a number of conventional mortgages that may work out better.
    I work for a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    ( I have ammeded this signature slightly, as I do not actively provide mortgage advice. However, I support and adhere to the moneysavingexpert mortgage broker code of conduct)
  • lisyloolisyloo Forumite
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    Also bear in mind that if they move to a smaller property then they will have smaller utility bills and lower maintenance/insurance and less to clean/maintain.

    My parents (in law) downsized last year to a sheltered flat.
    They have to pay a service charge, but get the place maintained, shared facilities, gardening, window cleaning etc done for them.

    They also have "red care" (those red string you can pull and call for help) and some company (coffee mornings and bingo).

    It has been great for them.

    Your parents might no be in need of that yet, but worth nearing in mind the lower bills and lower maintenance (both financially and in physical labour terms).
    Often as people get older they find they can't do all the clening and gardening etc.
  • Hi all, first post here, read loads though. I would like to know if my re-mortgaging theory is right. Here goes:
    I bought house 5 years ago £30k, now similar properties in my area are fetching £70k+ and I have more land than most. My question is if I was to re-mortgage for say £60k, dependant obviously on valuation, can I do this to use the extra £30k to modernise my house. Btw my discount term is up at the end of this year so no penalties for switching.
    Is this idea re-mortgaging or is it called something else. Any advise or info greatly appreciated. :-/
    If you truly love something, set it free. If it returns then it is yours. if it doesn't then hunt it down and kill it!
  • lisyloolisyloo Forumite
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    The proper name you are looking for is mortgage equity release.
    You might remortgage in the process (switch to another mortgage) but you could simply increase your existing mortgage which I don't think counts as a re-mortgage.

    If you are coming to the end of a discount period then it might make sense to re-mortgage at the same time to get the best deal.

    There are two things that the lender is interested in.

    One is the Loan to value. That's 60K/70K for example which is 85% so that shouldn't be a problem.
    Lenders dislike very higher %s because it means that if the price drops and they have to repossess the house then they might not get their money back, so it's a risk.
    I don't think you will have a problem with the figures you are giving.

    The other thing they look at is the income to mortgage ratio.
    This provides a rough give as to whether you can afford to repya the mortgage.
    Roughly speaking if you are single then the maximum is 3.5 times salary, so to borrow £60K, you'd need an annual salary of about £17K.

    This is a rough guide because each lender has their own rules, but gives you a a rough idea.

    So providing your salary is high enough then there shouldn't be a problem.

    The only other factor is your age.
    You need to be working for long enough to pay off the mortgage (you can have a mortgage in retirement but you'd need to prove you have income to pay it).
    If you are young it shouldn't be a problem, but if you are in your 50's or 60's then you need to think carefully about the term because ideally you want it paid off before retirement.
  • Thanx for that advice Lisyloo. Great help, cleared up a couple other things I wasn't sure about.
    If you truly love something, set it free. If it returns then it is yours. if it doesn't then hunt it down and kill it!
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