80 year old - mortgage options - equity release

ElizabethReyn

Hi Guys


I was hoping for some advice for my father-in-law.


He is 80 and currently had £75k outstanding on an interest only mortgage. He pays around £400pm. His rate is 4.99%


The house is worth around £360k.


They want to downsize in a couple of years but in the meantime wanted to switch deals if possible. A mortgage broker has advised equity release may be a good idea to pay off the £75k.


The mortgage has been transferred from Bradford and Bingley (who state they are no longer a live lender) to Chaconia Mortgages. There are therefore no lower rates to change to and he cannot change to repayment with his exisiting lender.


When they downsize they can obvs get the £75k paid off but with moving costs and stamp duty etc they wont get much for their left over money in the area. Ideally they would like to reduce their monthly outgoings as much as possible for the next two years and save what they can or change to a better rate on repayment and at least get some of the £75k paid off.


On mortgage broker has mentioned equity release but we have heard some horror stories about this.


I just wondered if anyone has any suggestions at options we can look at.


Thanks in advance

BoGoF

What is the rate on the equity release?

What is stopping downsizing now?

ElizabethReyn

They aren't ready to move right now. They haven't seen anything they like and they want to have another couple of years in the house I think.


Equity release seem to range between 3.49 to 3.55. I just wondered if there were early redemption charges with this. If they released £75k and paid off the current mortgage, would it be as simple as then paying the equity release back or would that follow them to the new property?


Thanks

BoGoF

Surely the broker would know this if he is suggesting it.

There are so many types of equity release schemes that it is impossible to answer your questions.

foxy-stoat

A question for the broker who offered the deal I would of thought, but for the lender to release the charge on that property I would imagine the £75,000 plus ERC plus fees would need to be paid back. If they are down sizing then they should be in a position to have a mortgage free property when they do.

ElizabethReyn

I need to find out exactly what he has been told. I guess the best scenario is to move to a lower rate for the next 2 years with potential repayment element. Then when the fixed rate has finished, sell and downsize and pay the outstanding amount off in full.


I wasn't sure how equity release could assist for such a short term if he then wants to downsize anyway in two years time.


I appreciate I don't have all of the required information in order to obtain advise but I appreciate all of your comments. Thanks

foxy-stoat

I am not sure that equity release would be the best thing to do in this case.

I would find out how much the interest rate will be and ALL the set up and exit charges charges.

If they are that desperate for the £400 a month to live or go on holiday on maybe the family could help out in the short term.