Lifetime Mortgage advice please

NotaRobot

We are seriously considering a lifetime mortgage equity release plan.

We have read all the paperwork several times, our plan is to release £30,000 on a house worth £180,000, in 21 years the total owed will be just under £80,000. In 21 years we will be aged about 90 and don't really expect to still be here. There would still, at that point, be £100,000 equity in the house to leave for our children. So even if one of us lives past 90, there would still be money left.

Do you think those figures are safe to proceed with? The only things we are worried about are what happens in the future to the markets, but is there anything wrong with the plan we have, whereby the loan still leaves a substantial amount left in the value of the house, even if there were no future increases in house value? I know values can decrease, but even if there were a 1% decrease each year over that term the value would still be £141,000 they tell me so there would still be £61,000 left for our children anyway.

Is there any hidden danger that we haven't forseen? Either in post Brexit Britain or terms and conditions of the mortgage that would seriously be damaging in our circumstances? Grateful for any advice from anyone who knows about these things. Thank you.

getmore4less

Is the rate fixed? (I make it about 4.7%)

Check with the kids they can probably fund money cheaper.

Do you need £30k now.

No one knows the T&C you are looking at,

key ones to make you can

you pay the interest to stop/slow the debt growing.
Pay of capital/Exit without penalties.

NotaRobot

Interest rate is 4.65%. The kids don't mind our doing this - and we are happy with the thought of the final figure being much less than even the present value of our house (which is too small to consider downsizing). There are early repayment penalties as with other deals, except on the last one of us dying or going into long term care. So if we are happy with the final figures, my point is whether we are overlooking any other material fact that makes a lifetime mortgage not a good idea?

kingstreet

If you took out an interest-only mortgage, there would be no interest roll-up.

£30k at 4% is £100 a month.

Could the kids pay that for you so their inheritance remains intact?

jaybeetoo

You may need the remaining equity in the house to pay for care home fees so the inheritance may not be intact.

NotaRobot

Kingstreet - thanks for that we had not considered doing that. What period are you looking at for that kind of loan to make it £100 per month?

Thanks jaybeetoo - we are not that concerned that the inheritance stays intact, to be honest. The kids are OK with that too.

Our concerns are whether there are other dangers we haven't thought of, e.g. the lender going bust perhaps, or whether the no negative equity promise not being kept to.... or whether we run out of money for care home fees - would the local authority pay for those if we had no money in the bank.... or would they insist we used the draw down facility (which we don't really want to touch)? we had conflicting advice from two advisers on this, one said the council could do that and the other said the council was not permitted to do that.

kingstreet

Interest-only, the term is irrelevant.

Have a look for retirement interest-only products as an alternative to interest roll-up.

getmore4less

NotaRobot wrote: »

Kingstreet - thanks for that we had not considered doing that. What period are you looking at for that kind of loan to make it £100 per month?

Thanks jaybeetoo - we are not that concerned that the inheritance stays intact, to be honest. The kids are OK with that too.

Our concerns are whether there are other dangers we haven't thought of, e.g. the lender going bust perhaps, or whether the no negative equity promise not being kept to.... or whether we run out of money for care home fees - would the local authority pay for those if we had no money in the bank.... or would they insist we used the draw down facility (which we don't really want to touch)?

Explain this in more detail.

Not clear why you need £30k now.

What are the exit penalties?

NotaRobot

getmore4less - we want £30K for our own personal reasons plus the fact that in the future we don't trust the draw down rates of interest not to increase - at least if we take it now (our maximum allowable amount is £49,000) we know what the interest rate is and that is guaranteed.

The exit penalties vary according to when they would apply, but we are not looking to repay early and would only be giving up the house after the last one of us dies or goes into care.

MoneyGeoff

NotaRobot wrote: »

Kingstreet - thanks for that we had not considered doing that. What period are you looking at for that kind of loan to make it £100 per month?

Until you both die. Read up on Retirement Interest Only Mortgages

https://www.which.co.uk/news/2018/03/fca-opens-door-to-interest-only-mortgages-lasting-into-retirement/

They have only been allowed by the FCA since March 2018 so are quite new. More choice will become available over time. Might be best to see a mortgage advisor.