Equity Release guide discussion

l44wsa

I’ve recently found out that my in-laws did an equity release about 20 years ago and have paid nothing back on it since. I have no idea of the sums involved (finding out later today) but my father in law is now starting to worry that he’ll have nothing to leave to my wife and her sister when he’s gone. We’ve told him not to worry about it but he’s looking into all sorts of schemes and talking about paying out 000’s for advice when he can’t afford to pay back the loan and interest anyway and I think he’s being scammed into talking to people who won’t have a helpful endgame. Neither my wife and I or her sister are in a position to buy the equity release out however my company is. So my question is does anybody have any experience of using their business to buy out their or their parents equity release? Would the company be able to take a percentage share of the property, as an investment maybe, and get the money back when the house is sold? Possibly work out a deal similar to help to buy so that it owns a % of the property, and no matter what the selling price it will always be able to get its outlay back in full even if house prices fall but may also make money if they go up? Obviously the in laws wouldn’t own a % of the property but at least this would stop interest being added and leave the girls a % share of the family home once their parents pass?

missile

Your easiest option would be to have your company give you a directors loan and use this to repay ER.
The ER company will give your in-laws advice on how much it would cost to repay ER and release their charge over the property. Your funding of this payment would not grant you a share in the property.
You may need legal advice?

Nick_Lovell

Fundamentally, you need to understand if this was a lifetime mortgage or a home reversion scheme (part or full). You can certainly settle the outstanding loan with the lender if a lifetime mortgage exists, but you need to know the figures which of course I know you are finding out. The lender will indeed need full settlement to release the first legal charge. It would also be worth reviewing the current arrangement as loans taken out 20 years ago will have much higher interest rates than today and it could be re-mortgaged to a much lower rate and save interest charges at the higher rate, and you could consider paying part of the loan off at this stage. If a home reversion scheme then this would mean that part of the property has been sold to a provider, and whilst no interest is charged they now have rights over a percentage of the property and these are more tricky to deal with. There are options, but the full make up of the loan and the property value need to be understood and then you can get best advice on this. Any advice should be on an initial fee free basis, but talk to a reputable advisor. I think a complete holistic view needs to be taken over the estate which will require financial advice. I've certainly seen significant savings being made by simply re-mortgaging out of the current arrangement. 

Keep_pedalling

l44wsa said:

I’ve recently found out that my in-laws did an equity release about 20 years ago and have paid nothing back on it since. I have no idea of the sums involved (finding out later today) but my father in law is now starting to worry that he’ll have nothing to leave to my wife and her sister when he’s gone. We’ve told him not to worry about it but he’s looking into all sorts of schemes and talking about paying out 000’s for advice when he can’t afford to pay back the loan and interest anyway and I think he’s being scammed into talking to people who won’t have a helpful endgame. Neither my wife and I or her sister are in a position to buy the equity release out however my company is. So my question is does anybody have any experience of using their business to buy out their or their parents equity release? Would the company be able to take a percentage share of the property, as an investment maybe, and get the money back when the house is sold? Possibly work out a deal similar to help to buy so that it owns a % of the property, and no matter what the selling price it will always be able to get its outlay back in full even if house prices fall but may also make money if they go up? Obviously the in laws wouldn’t own a % of the property but at least this would stop interest being added and leave the girls a % share of the family home once their parents pass?

Sounds like a good way to wreck your business if you are not careful. 

203846930

Just a thought, if you don't need the money that he might leave you, just tell him him.

You sound like you are tying yourself into knots to put your company in debt for very little return anyway.
I am no expert but after 20 years I doubt if there is that much to be gained buying back the debt.

TELLIT01

The worst that can happen is that there is no equity left in the property when he dies.  He doesn't leave his children with a debt, if that is what worries him.

DairyQueen

missile said:

Your easiest option would be to have your company give you a directors loan and use this to repay ER.
The ER company will give your in-laws advice on how much it would cost to repay ER and release their charge over the property. Your funding of this payment would not grant you a share in the property.
You may need legal advice?

Bit late to the party but I felt I should add my two penn'orth.

Directors' loans must be repaid within nine months of the end of the accounting year in which they are made. They also incur interest, and this is chargeable at not less than the official rate. It is also considered a benefit in kind.

HMRC are very suspicious of such loans and it will throw up a red flag. Not least given that a non-income-generating property purchase  is hardly a great investment. 

I would caution against using company assets for any such scheme. 

vix2000

My dad is 91 and it has become increasingly evident during lockdown that he can no longer live independently. He has an equity release on his property but has paid the interest monthly.  There is a hefty early repayment charge, but this is not payable if he needs to go in full time care.  Does anyone know what the equity release company will need from us in this situation?  He does not have any funds to go into care until his property is sold. 

Nick_Lovell

You will need to produce the ' medical evidence' that your father needs to go into long term care. Usually the lender will require a letter from the doctor attending to confirm, but do call the lender and get their particular requirements. Once this is evidenced there will not be any ERC payable. 

203846930

When the time comes for me to get a new car I would like it to be 'all electric' but the only way I could raise enough (£25k) would be through a Drawdown Lifetime Mortgage.
I have no dependants so no worries about who gets my money so I would also use some of the house to pay for my end of life wishes upfront, up to about £3000 and if possible take a small income from the rest for home comforts.
Not a high value house at £85k but do debt connected to it at all and sound on the ground.

Does this sound like a workable plan? it would be somewhere about 3+ years down the road yet when I get to 65.