Mortgage equity downpayment?

Cassius14

Hi there,



My mum has paid off her mortgage but is looking to take some money out to renovate her house, roughly £20-25k. She has seen an offer in a paper from Stonehaven offering an equity release loan with an interest only (5.89%) payment scheme. What concerns me is that the loan duration is 24 years and the loan amount will quadrouple if the payments can't be made. I am sure the repayments won't ever be an issue, I'm just concerned that, although my mum is healthy 64 year old, that anything could happen over the next 24 years.



As loans are tricky to get an her age I'm wondering if there were any other options available to her of getting cash out of her home? Any advice would be warmly welcomed, thank you.


Chris

djpix99

The interest rate sounds high compared to a personal loan or mortgage. If your mum has a reasonable income could she look at personal loans, they start at 2.8% interest. Alternatively she could look to get a small mortgage on the property, I cant imagine the interest rate would be anything like 5.89%, more likely sub 2%. Probably best speaking to a mortgage adviser for if they think it is the right option though.

Cassius14

Thanks djpix99, I'll look into it now.

Thrugelmir

Does your mother have a guaranteed level of post retirement income to service a debt of that level? Interest rates could rise over a 24 year term.

foxy-stoat

So she wants to take out a £25,000 loan - repaying £170 a month for 24 years and then will have to find £25,000 to pay back to the lender.

She will be paying over £60,000 for a £25,000 loan.....why dont you get a personal loan and give her the money - the likelihood is that the property will be yours when the time comes and you can save her the stress of this loan hanging over her head for the rest of her life.

Cassius14

Her income is around £1,500/month. You're right about the interest and it's the term that is putting me off the idea.



I have looked at a few personal loans but they all come back with only a 10-30% chance of being accepted.

Cassius14

Thanks foxy-stoat. I had also thought of this too but my mum was against the idea. I will chat with her about it again though.

foxy-stoat

What is she going to spend £25,000 on in her house?