Equity release info needed

ViolaLass

Could she get a lodger to cover the mortgage?

jamesd

daveofjoy wrote: »

My Mum has 3 years left on her mortgage. She currently is in a job she really doesn't like and so she wants to release equity in the house to pay it off so she can retire. I understand that ER is not a very efficient way of generating cash and I've suggested she might consider alternatives like downsizing but she is quite reluctant to do this as she's very attached to her house. I want to make sure she is armed with all the info and so I'd really appreciate any advice on what to look out for, what are the pitfalls etc. Thanks!

Some places will now do normal mortgages to age 85 if that will be affordable so a chat with a mortgage broker about that sort of option may be a good idea.

Equity release can be useful in part because some of the more modern products let you pay the interest and capital if you want. In effect that sort of product can be used as a lifetime interest only mortgage and eliminate the requirement to pay off capital every month. Then she could perhaps choose to repay capital gradually once all of her pensions are in payment.

While she doesn't want to move, it is worth considering the extra income she might be able to get if she moved to a place with no mortgage needed and released some equity. Something like state pension deferral can pay 5.8% a year increasing with inflation for life for each year of deferring taking it for a person reaching state pension age after 6 April 2016, 10.4% before then. Funding that using the freed up equity from buying a cheaper place. If she might be entitled to means tested benefits later that had to be considered, higher income might mostly just cut her benefit entitlement.