Equity release to advance inheritance for house deposit?

pamaris

Hi,

Currently OH and I are priced out of our market. We are living with OH's mum to save a deposit. We are resigned to this for the most part.

However, my MIL suggested maybe she could do an equity release to advance part of OH's inheritance because she is concerned and wants to see us in a house. Mum's house is worth £140-150k. She would need to take out £25k for us. She is 63.

How would this look in practice, and are there any pitfalls, and what would we need to be aware of when it came time for probate?

Also, would this affect my MIL badly in any way? Another consideration is that when mum dies, the proceeds of the house will be split 50/50 between DH & his sister. Would this affect her portion of the inheritance at all? Also, is there a particular type of plan that would be suitable for our circumstances?

Thanks

hedgehunter_2

There are two types of equity release scheme, the first is a life time mortgage. Your MIL can borrow £25000.00 and interest rolls up whilst she is alive and repaid following her death whenever this may be.

The second is called reversion, where you sell a proportion of the current or future value of the house for a lump sum and or income. You will sell considerably more of the proportion of the current value than you will receive.

A lifetime mortgage is expensive the longer your MIL lives for because the interest is compounded, a reversion scheme is expensive the shorter the time your MIL lives for because the proportion ginen up generally assumes average life expectancy.

In either case it will have a significant effect on the remaining value of the estate and therefore the sisters share.

Careful thought and other options explored before even considering this action, whilst it may be a solution for you, there are consequences to your MIL and to her estate.