Equity Release guide discussion

Maisiebabe

I moved into my bungalow 2 years ago and I love it, I used to run a pet services business until COVID, which brought it to a dead stop.  I've received no help from the Govt or local council and have the lease for the van still to pay at £334 a month.  To end the lease early PNB Parisbas want £12k.  I don't have that to hand so I looked at a Retirement Interest Only Mortgage, borrowing the amount to pay off the lease.  I have been working in customer service to pay the bills and I am in receipt of an RAF pension, so I thought I would be ok.  I have over 50% equity in my property.  But Nationwide say I failed the affordability check.  So I pointed out that I am currently paying twice what the proposed repayment would be, so how can they say I can't afford to pay them £300 a month less?  "Oh, we don't take your income into account, only your pension"  But they hadn't taken the state pension or the two other pensions I will get when I retire into account.  So, they say you are eligible if you are over 55 but what they really want is someone over 70 who only gets a pension and no income.  But they did say that I could borrow the additional amount at an additional £120 a month!

So do I put my house up for sale or is there another way that I haven't thought of?  I have not defaulted on any payments but my age, 57, restricts how long I can take a mortgage over.

Savvy_Sue

I'd talk to an independent financial advisor who can talk you full circumstances into account.

Browntoa

At 75 any equity release could be classified as "deprivation of assets" if you need care down the line . Particularly if the property swaps from your sole ownership to joint ownership at the same time.

Needs proper financial and tax advice 

Appears the poster I replied to has deleted their post

Nick_Lovell

Maisiebabe - a lifetime mortgage is not an option, due to loan to value, as 57 you would not get a sufficient level of funds. RIO's are an option but the affordability criteria is ruling those out, but it would be worth speaking to a whole of market adviser who can explore the options for you within the RIO market. The lifetime mortgage route would have been ideal, as does not require affordability checks, but just not going to work with your age and LTV at this time. The only other option is to come to some arrangement with creditors in the short term, but this can impact your credit rating. 

PeteJS

Hello, I have an elderly relative who has gone into a care home. She was in hospital for a while and the transferred to the home. Up until that point, she had lived in her own bungalow. With her sponsorship, my brother and I have applied for Power of Attorney, and we know that she will need to pay whatever she can out of her savings to pay for the monies owing for her care, down to a level of savings of just over £23,000 , at which point the council will take over the cost of her care. We also know that some years ago, she took out an equity release plan for her home. Whilst we have no details of this yet, my concern is that if she owes interest over and above what is left in the value of the home, that the equity release company might take her remaining savings from her (i.e. the £23,000 or so that the home or the council cannot take). Can anyone advise please - is that £23,000 protected from all debtors, or just in respect of residential care debts? 

Keep_pedalling

PeteJS said:

Hello, I have an elderly relative who has gone into a care home. She was in hospital for a while and the transferred to the home. Up until that point, she had lived in her own bungalow. With her sponsorship, my brother and I have applied for Power of Attorney, and we know that she will need to pay whatever she can out of her savings to pay for the monies owing for her care, down to a level of savings of just over £23,000 , at which point the council will take over the cost of her care. We also know that some years ago, she took out an equity release plan for her home. Whilst we have no details of this yet, my concern is that if she owes interest over and above what is left in the value of the home, that the equity release company might take her remaining savings from her (i.e. the £23,000 or so that the home or the council cannot take). Can anyone advise please - is that £23,000 protected from all debtors, or just in respect of residential care debts? 

Highly unlikely, if the interest has eaten up all the remaining equity in the house, that is as much as they can take. You need to get an up to date statement from the ER compNy. Any remaining equity in the property will be need to be included in her assets for assessment for care contribution unless a spouse, or dependant relative is living there.

Nick_Lovell

Keep-pedalling, the lender can only redeem their loan, however, interest will continue to roll up and compound until the property is sold. Do inform the lender, as this event does trigger the sale of the property. They have no claim on the savings, as they will just have first legal charge on the property, so this is their only interest. The remaining equity will pass to the estate for the care costs.

PeteJS

Nick_Lovell said:

Keep-pedalling, the lender can only redeem their loan, however, interest will continue to roll up and compound until the property is sold. Do inform the lender, as this event does trigger the sale of the property. They have no claim on the savings, as they will just have first legal charge on the property, so this is their only interest. The remaining equity will pass to the estate for the care costs.

I only have the vaguest details because my relative can't recall the full details of her finances and is stuck in the home, unable to access her house. My brother and I are in the process of getting Power of Attorney for her so when that (finally) comes through, we'll be in a position to get to the fine details and take the necessary steps - at present I don't even know which company the equity release is through.  

Nick_Lovell

A tough one! Hopefully the POA won't be too long - although these can take sometime to go through the Court of Protection. Hope all goes well and you get it sorted.

tubbyewe

Hi,
Is there a general rule of thumb regarding percentage of equity that can be released from a house with no mortgage.  Eg at age 60 =10%   70= 20%    I'm on;y looking for ball park figures to base my initial musings on or am I being too simplistic?
Cheers
David