Lifetime equity release mortgage

LSP

Hi My dad released £20,000 for home improvements in 2000, he died in 2002 and my mother still lives in property. This debt is now over £80,000 (8% compound Int) the property has obviously dropped in value to approx. £150,000. I assume if she lives another 10 years they will take her whole property but what if debt is more than value of home? as I am only beneficiary will I have to pay any money if debt is bigger than the value of property?

kingstreet

Please establish if this is a "safe home income plan" with a negative equity guarantee.

Look here for more;-

http://www.equityreleasecouncil.com/home/

holly_hobby

Check the T&Cs, hopefully there will a no negative equity gte clause,which will be the case if the provider was a SHIP (now Equity Release Council) member at the time.

Debts aren't transferrable on death. Which means that if there is a shortfall on the mge, which does not have negative equity gte protection, the residual will have to come from the remainder of Mum estate.

Once that is exhausted, and if there is still an OS balance, thats it, as debts aren't transferrable to beneficiaries/family etc, the mortgage company will essentially have to write it off th books.

As I say, I would expect a 2000 LTM to have a no neg equity clause, but you have additional info if this isn't the case.

Hope this helps

Holly

Mistral001

LSP wrote: »

Hi My dad released £20,000 for home improvements in 2000, he died in 2002 and my mother still lives in property. This debt is now over £80,000 (8% compound Int)

Compound interest on £20,000 @ 8% over four years = £60,000? It adds up to about £7200 by my calculation. There must be other costs such as administration fees to increase the debt by £60,000 to £80,000.


Sorry, it is over 14 years. Still is only £39k interest approx.

Jenniefour

It's compound interest over 14 years. According to the online calculator I've just used the interest on 14 years at 8% pa is already just over £61k.

Mistral001

Jenniefour wrote: »

It's compound interest over 14 years. According to the online calculator I've just used the interest on 14 years at 8% pa is already just over £61k.

I saw my mistake and edited my post, but thanks anyway for picking it up. I did not use online calculator, but I have checked my calcs using one and it came up with the same result. The interest is about £39k (added to capital gives £59k). Me thinks the extra £21 is admin costs.