Can I Get The Equity Out of My House

homeworkgirl

I recently lost my husband. Unfortunately we had forgotten to extend our life assurance when we re-mortgaged and as a result there was no pay out to cover the mortgage when he died. Since his death I have been off work with stress/depression and am finding it very difficult to keep up the mortgage payment. The annoying thing is that there is approx £90,000 equity in my property after allowing for payment of the outstanding amount of approx £50,000. I wondered if there was any way that I could get my mortgage paid off out of the equity?

Any advice would be much appreciated.

ixwood

Sorry to hear that.

The only way is to downsize if possible and use the difference. Else, the only way is to borrow money against it, which obviously isn't going to pay off a mortgage.

Redbedhead

There are generally two ways to release equity:

Remortgage and increase the mortgage (but this would involve you then repaying a higher monthly amount to the mortgage company)

Sell up and downsize.

The first option also won't pay off the mortgage.

homeworkgirl

Thanks for your help. I originally thought of selling up but really want to do all I can to stay here now as my daughter took her dad's death very hard and I don't want her to lose her home too. We only live in a smallish terraced house anyway so if we sold up the only alternative would be a flat which I would hate to go back to now. It just seems crazy that there is so much equity in the property and I can't get my hands on it without having to sell.

Dithering_Dad

I'm afraid that you have fallen into the trap that a lot of home owners fall into - as their property increases in value they feel wealthier. In reality they are no better off because they cannot get at that money, unless they sell the house. If they sell the house they then have to buy a smaller one or one in a cheaper area to realise any gains.

For example, if you have a £200k house with a £50k mortgage then you have £150k equity and own 75% of the house.

If you took £50k out of your equity and put it into the bank you would have to get a mortgage. The figures would then stack up as £100k Equity with you, £100k mortgage and £50k in the bank. You would own 50% of the house and the bank would own 50%.

If you took the £50k from the bank and then used it to pay back onto the mortgage, you would end up right back at the start - well, except that you will have had to pay out several hundred pounds in arrangement fees.

Even if you owned all of the house (£200k) and the house doubles in value to £400k, you would still have to get a mortgage to release any of that gain and remain living in the house.

homeworkgirl

Thanks very much for that Dithering Dad, very helpful. I was wondering about equity release scheme type of thing whereby i could sell part of it to an organisation and they have a charge over the house and get paid out when I die? Or do you only qualify for equity release when you have paid off your mortgage?

Dithering_Dad

I think you have to be over 60 or 65 to qualify for equity release. The other option is to sell your house and rent it back from one of the many [strike]jackals[/strike] [strike]Vultures[/strike] [strike]sharks[/strike] companies that offer this service.

Have you made sure you that you are receiving all the benefits you should receive with your new status as a single mother (www.entitledto.co.uk). Have you informed the council to get reduced council tax?

If I were you I would go onto the DFW board and tell them about your situation. They're a lovely bunch and work miracles with your income/expenditure. You may find that after making any cut backs they suggest, money isn't quite as tight and you won't have to resort to such drastic measures as selling the house.

Good luck!

homeworkgirl

Thanks again DD. Excuse my ignorance but what does DFW stand for please??

sandy_beech_2

debt free wanabe board stands for dfw..

littlewren

Dithering_Dad wrote: »

I think you have to be over 60 or 65 to qualify for equity release.

You can be 55 and take out Equity Release (some companies/schemes offer this). I am 54 and am seriously thinking about taking out Equity Release on my next birthday to free up some money so that I can buy some furniture etc. as all the money is in the house. It's not ideal to take it out at an earlier age but I intend getting some good advice before I go ahead.