Balloon Payment

ACG

She could potentially do equity release as there is plenty of equity.
No inheritence your side, but at least your mum gets to stay in her home and there is no burden on you.

AnotherJoe

From what I've read there isn't "plenty" of equity. There is about £50k but think I read here they will generally only lend about half the equity, which is £25k which doesn't even pay off the mortgage. She is also quite young in equity release terms. SO she'll end up paying off teh mortgage partly still need to fund the shortfall and have no cash.

So unless there is something wrong with my understanding she'd be better off to sell up, take the £50k equity and use that plus earnings and pension to rent.

ACG

Why would they lend on the equity?
They would lend based on the value, the money they give your mum is used to pay off the current mortgage.

£50k is all relative. If you have a £55k property then there is 10% equity and very little to play with, if it is a £500k property then there is 90% equity. Personally I would think it is worth investigating (and I say that as a broker who does not do equity reliease so I have nothing to gain from it) as I think it would be beneficial to your mum.

I can not really see a downside based on what you have said.

AnotherJoe

ACG it's a £90k property with a £40k mortgage so no need for theoretical figures.

And you ask "why would they lend on the equity" ..... Am I missing something? It's called "equity release" for a reason !

ACG

But assuming the ER provider would offer £39,000, the £39k would be used to clear the current Mortgage.

It would not be £39k plus £39k.

So it would be 43% LTV which I think is fairly low on ER, although mums age will say whether it is low or not.

Regardless of the figures involved, why would you not speak to someone to see if it can be done? Mum lives rent free forever, the OP does not have to shell out anything and can relax knowing mum can live her home without any worries for the rest of her life.

AnotherJoe

ACG wrote: »

But assuming the ER provider would offer £39,000, the £39k would be used to clear the current Mortgage.

It would not be £39k plus £39k.

So it would be 43% LTV which I think is fairly low on ER, although mums age will say whether it is low or not.

Regardless of the figures involved, why would you not speak to someone to see if it can be done? Mum lives rent free forever, the OP does not have to shell out anything and can relax knowing mum can live her home without any worries for the rest of her life.

Why would you assume that? As I've read here they will pay half the equity. Which is half of £50k, eg £90k minus £40k (I'm rounding up) which is £25k not the £39k you mention.

Having said that there's little harm in asking in case they will lend enough to clear the mortgage and that would be good feedback here but i think she shoudl be prepared to be disappointed.

ACG

Im not sure its an assumpion as such.
If the mortgage is not paid off in full the house could be taken by the bank. It would defeat the point of doing it if the current mortgage would not be cleared in full or at least massively paid down to a point where the current lender would accept a payment plan for the difference.

Nick_C

One option would be for you to offer to buy your mum's house for £40K and charge her just enough rent to cover the mortgage and maintenance. Get a BTL mortgage. She gets to stay in the family home. You have a nice little long term investment to supplement your income in your old age.

If your mum sells up and uses the capital to rent, it won't last long and it will stop her getting any means tested benefits for a while.

AnotherJoe

The OP has already said several times he would need a mortgage and doesn't want to be locked in to buying a house he doesn't like for the next 20 years.
He also would be unlikely to be able to get a BTL mortgage with a family member paying rent.
Its also a fraught process, what happens if mum falls on hard times (seems likely considering her current state) and cant pay the rent? Does he chuck her out on the streets?

Other than that, its a good idea :eek:

mrsnobody

Equity release (lifetime mortgage) enables the customer to borrow a % of the property value based on their age. OP indicated that his mum is 63 - it's unlikely that enough could be raised through this alone to repay the mortgage (typical LTV for this age is 30-33%). If mum or another family member could come up with the shortfall then ER might be an option.

Bear in mind that if the property doesn't value up at £90k the shortfall will be greater.

A home reversion plan (where the property is sold to the finance provider and the customer has the right to live there for their lifetime) may also be an option.

Speak to a broker specialising in equity release for more help on this.