Equity release advice pls?

fozziebear2005

Hi all,

So I'm trying to untangle my mum's finances (she's still with us, and in her late 70s, but not very good with the little money she has) and I found an equity release statement. I knew she took out the equity release on the property she owns (mortgage free), but was a little shocked at the current balance.

She took out the equity release through Aviva in Nov 2002 for £17.1k, to pay off debts. The compound interest rate is 7.75%, and the balance is currently £47k, with interest coming to £3.5k per year and rising.

The house is worth about £130k, and her total state pension income is £650 per month, so there's no way she can pay it back (I know it's not really meant to be paid back while your alive). And unfortunately neither can I.

I just wondered if anyone had any advice in terms of refinancing, as 7.75% nowadays is a huge rate (though I understand it was relatively normal when she took it out). I briefly spoke to Aviva about it on Saturday who gave me the audio equivalent of shrugging their shoulders and not being bothered.

Any advice anyone can provide would be greatly appreciated!

Thanks,

Mark.

dunstonh

I just wondered if anyone had any advice in terms of refinancing, as 7.75% nowadays is a huge rate (though I understand it was relatively normal when she took it out). I briefly spoke to Aviva about it on Saturday who gave me the audio equivalent of shrugging their shoulders and not being bothered.

Product providers are not able to offer advice or opinion. It is not their remit and cannot enter into those areas without creating a breach. The regulatory permissions that stop them from doing this can be mistaken for disinterest on being unhelpful but they have no choice.

Equity release have higher interest rates than residential mortgages. A 7.75 rate is not huge for equity release. You can get cheaper but rates are often set on individual circumstances. So, you cant assume you will get the cheapest rate.

It is possible to change lender on an equity release. It isnt that difficult to do so either. However, the costs involved in doing so have to be weighed up vs the rate gained.

A local IFA or whole of market mortgage adviser who does equity release should be able to look at this for you.

ukamber1

fozziebear2005 wrote: »

Hi all,

So I'm trying to untangle my mum's finances (she's still with us, and in her late 70s, but not very good with the little money she has) and I found an equity release statement. I knew she took out the equity release on the property she owns (mortgage free), but was a little shocked at the current balance.

She took out the equity release through Aviva in Nov 2002 for £17.1k, to pay off debts. The compound interest rate is 7.75%, and the balance is currently £47k, with interest coming to £3.5k per year and rising.

The house is worth about £130k, and her total state pension income is £650 per month, so there's no way she can pay it back (I know it's not really meant to be paid back while your alive). And unfortunately neither can I.

I just wondered if anyone had any advice in terms of refinancing, as 7.75% nowadays is a huge rate (though I understand it was relatively normal when she took it out). I briefly spoke to Aviva about it on Saturday who gave me the audio equivalent of shrugging their shoulders and not being bothered.

Any advice anyone can provide would be greatly appreciated!

Thanks,

Mark.

Hi Mark,

Not much help on how to pay this off but most equity release deals (lifetime mortgage) only get paid off when the person is no longer living in the property or its sold. My mother recently did the same thing but did it with the understanding that there will likely be very little equity left in the property, when deal ends, as the amount owed goes up so much each year.(as you not making repayments to reduce the interest) After looking into it, we found that(in my mothers case, factoring age/house value etc) it was worth her getting the full 37-40% allowed as she will have very little equity left, when deal comes to an end, no matter how much she borrowed, especially if she lives in the property for another 20years, without paying off the interest. Selling the house early, can also mean a penalty (couple of thousand in some cases)...difficult to know best plan of action...Current lifetime mortgages are between 5-6% interest rate, so not really sure it worth moving deal to another Lender, by the time you pay off any charges etc, you might not be making much of a saving. You never fall into negative equity so atleast you know the total amount is capped below house value BUT unless you are able to pay the current amount off or sell the property now, I not sure how your mum can pay this debit off early.....

If your mum lives in the property another 10-15 years, the charges on the amount owed will be closer to 85k....

As mentioned, dont really have any answers for you but hopefully one of the experts can jump on thread and let you know, what the options are..

Best wishes