Equity Loan Rip Off - help!

thriftymiss_2

Hello there


please oh please can someone tell me what my Nan can do?? Her late husband took out an Equity Loan against their bunglaow in 1988-1989. They wanted to release £18,000, which they got - however years later it seems they want £80,000 to buy th bungalow back or this amount of the selling price when my nan kicks he bucket. Is this actually legal? The bungalow must be worth around £150,000, and I cant believe they want this much for the original loan. The loan is with Portman Building Society. HELP> Martin, MSE anyone. Advice required asap.:A

thriftymiss_2

when I say 'they', in relation to wanting £80000, i mean the money mongers.

MarkyMarkD

For goodness's sake. Why does everyone think that they are being ripped off?

Equity mortgages are NOT a rip-off.

They involve the lender accepting reduced, or no, repayments in exchange for a share of the equity of the property.

Presumably the value of the property has increased about three times since 1988, and they've paid no interest, based on the scale of the figures you supply.

The point of equity release mortgages isn't to be able to sell the property and walk away with a big pile of spare cash. The point is to help people who have no money, but lots of equity in their property, to live their retirement in a reasonable level of financial well-being.

If the property value had not gone up, the lender would have lost lots of money on the deal.

If the property value had gone up by what would probably have been considered a reasonable amount, the cost would have been similar to a normal mortgage.

But because the property value has gone up by way more than anyone would have expected, the return to the lender is way more than anyone would have expected.

The fact remains that the equity release loan enabled your grandparents to stay in the house rather than downsize; if they'd downsized, they'd have lost a large proportion of the increase in value they've achieved.

Yes, it's legal. Yes, it's fair. It's a gamble your grandfather, but one which gave him some money he considered he needed.