Equity release or interest only mortgage

MJBernacki

I am a semi retired teacher in receipt of an actuarial reduced pension and my wife is a retired local government officer with an occupational pension and state pension. We have seven years to run on our repayment mortgage with Halifax and due to a change in circumstances we will not be able to afford our monthly repayment of £1104 in the near future.
We contacted an equity release company who have offered us sufficient capital to clear the outstanding balance at an interest rate of 5.51% which we could afford to pay leaving me enough money to service credit cards and a loan.
Our home is worth in the region of £260,000 and the mortgage balance is £80,000.

MoneyGeoff

Have you contacted a broker about a retirement interest only mortgage? What would the monthly payment be?

You say you are semi retired so I guess relatively young. That would leave a lot of years for the equity release debt to compound. Do you have children or someone expecting the house as inheritance?

I would favour a RIO mortgage over Equity Release.

AnotherJoe

If all that would let you do is "service credit cards and a loan" I suggest you seriously consider downsizing to clear the cards and loan instead of paying a high price for ER and still being stuck paying them.

In essence it would be DIY ER. Otherwise with the rate a 5 1/2 % loan will accumulate up, you'll run out of ability to move anywhere else in future and be looking at rental in later life rather than being secure for the rest of your lives with a paid off 1 or 2 bed flat or smaller house on which you could later do ER if needed though with 4 pensions coming in eventually (existing 3 plus your SP) hopefully you wont need that.