Equity Release Spiralling Nightmare

l44wsa

Hi all, I'll try to give as much information as possible but don't know the full details!


My father in law took out a £30k equity release loan on his property about 20years ago and has just told my wife he now owes £60K and counting. He has told her that if he lives another 20years then the debt could reach £120k meaning that my wife and her sister would basically not have much left as an inheritance from the house value, which is probably about £150k.


I'm not sure exactly what kind of loan he has got as he's quite a private person and won't give much away, however, I can only presume whatever loan he's taken out he can't be paying anything at all off it, as if he was paying the interest only the loan amount wouldn't be rising??!!


I'm just wondering if anyone has heard of an equity release loan of this type, where nothing gets repaid, and most importantly if anyone can suggest what we can do to get him out of it? Is it best to start paying this loan off or do we accept the losses so far and start paying the interest only? I presume my in-laws don't have much spare cash from their pensions and that's why they haven't paid anything back so far but if we're going to benefit in the long run by inheriting the house is it best for us and her sister to help out??

TrickyDicky101

This is a fairly typical structure for equity release - it sounds like a lifetime mortgage (which frequently requires no interim interest payments, but the interest does roll up thus increasing the debt and future interest charges).


You'd need to see what agreement was entered into by your in-laws. Possibly you won't be able to make interest or capital payments off of the debt.


To be honest, it's not you/your wife's property to decide what to do with - it was your parents-in-law and they took the decision to release equity. Their business, their decision.

foxy-stoat

Depends on the contract he signed and the repayment terms/interest/small print.

If you want to save the property from being repossessed on death you will need to see the paperwork and find a way forward.

Maybe they included PPI on this loan !

AnotherJoe

but if we're going to benefit in the long run by inheriting the house is it best for us and her sister to help out??
===========

Well, you'll have to investigate if its even possible to buy him out of it, and then decide if thats worth getting the house in 20 years time and what you could do elsewhere with the money instead.

Do you have (at least) £60k knocking around? between the two sisters?

That assumes you can buy him out. It may not be a deal that you can do that, or there maybe much higher fees required, eg you have to pay back not just the £60k but a proportion of the rise in price of the house since the deal was done.

Start there and come back with detail and numbers.

kingstreet

The good news is, with later Home Reversion/Home Income plans, the homeowner got a "no negative equity" guarantee.

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

So even when the debt exceeds the property value, he will still be able to live there until he dies, rent/payment free.