Is this normal? raising funds against a house owned outright

JakeF

Hi all,

Firstly, thank you to all the contributors on this forum, I have benefited from posts on here many times however this time the specific topic either doesn't exist, or I don't know what I'm searching for (which is half the problem!)

We have recently purchased a property and are in the process of obtaining planning permission for extensions/renovations

Our in-laws have kindly offered to "gift" us £40k through raising a new mortgage against their property that is paid off/owned outright as of last year

One of them is 58 with an £18k salary, the other is 53 with a circa £10k self employed income. The house is worth around £120k

They are happy for me to go through the application process on their behalf which I have started but quickly realised I didn't know the specific product I was looking for! They are technically not re-mortgaging, first time buyers or applying for one of those complicated "lifetime mortgages" so what option do I tick when using comparison sites? Is it a specialist mortgage they need or just a normal mortgage with a cash advance?

Sorry, I realise this might be a simple question but I wanted to test the market first knowing specifically what product I'm looking for.

My additional question is: I originally understood that the banks would only lend up until 70 years old but I have read on another post that up to 75 is an option - does anyone have a handy table or list for the different lenders?

Thanks in advance to all!

cahillg81

There are lenders who will allow you to remortgage an unencumbered property. Getting £40k out a property value of £120k shouldn't be too difficult but the problem based on the face of it is the term they are paying it back over on that income.

The lenders are going to work the term on the age of the eldest applicant meaning a maximum term of 17 years assuming they are working till then - which is way in advance of state retirement agent. You are going to have plausibility issues and if they are going to fund repayments from a pension then again the lenders will want to see evidence of this and may not necessarily use the income from employment. You would be best to speak to an advisor who can work through the different options.

JakeF

Thank you for a reply

Hopefully affordability will not be an issue. Up until recently (last year) they were paying circa £300 a month on their previous mortgage and have no debts or even credit cards...

With regard to the product I'm looking out for - is it a "re-mortgage"? or should I look to go through an advisor to do all that good work for me?

amnblog

They should use an adviser. You should stay out of it. Otherwise, when it goes wrong, guess who's in the frame.

The decision to give you the cash should be solely theirs as should the action to raise it.

Thrugelmir

JakeF wrote: »

With regard to the product I'm looking out for - is it a "re-mortgage"? or should I look to go through an advisor to do all that good work for me?

The term mortgage relates to the legal charge place on the property to secure the debt. Otherwise it is little more than a loan. Though mortgages themselves have more restrictive terms than an unsecured personal loan.

A broker may aid the process of finding a lender that is interested in underwriting this type of business at a competitive rate of interest.

While lenders will extend repayment terms beyond retirement age. Affordability criteria will have to be met. For the majority of people this will be their pension entitlements.

SavingSteve

Not sure why the replies are so convoluted. You're after a remortgage, that is what this is (even though property currently has no mortgage)

Thrugelmir

SavingSteve wrote: »

Not sure why the replies are so convoluted. You're after a remortgage, that is what this is (even though property currently has no mortgage)

Remortgaging is where you pay off your existing mortgage and switch to another lender. To give a convoluted response.

minimike2

Steve is right - Many lenders still refer to it, and indeed most offer products, based on a remortgage, in this scenario, regardless of the technicalities. I was thinking the exact same thing as I went down the initial responses.

User1489

They are after an equity release product - as they have paid their mortgage off!!!

Try one of the new and reputable companies, like OneFamily.

ViolaLass

rasputin_thorpedo wrote: »

They are after an equity release product - as they have paid their mortgage off!!!

Try one of the new and reputable companies, like OneFamily.

Not if they're looking to make a normal monthly mortgage payment.

minimike2

rasputin_thorpedo wrote: »

They are after an equity release product - as they have paid their mortgage off!!!

Try one of the new and reputable companies, like OneFamily.

No. They are not.