Retired - change loan secured on house

Notebook

In-laws had loan secured on house in retirement that is payable on death. So this currently accrues compound interest.
Rates have dropped since they signed the fixed rate some years ago.
There is a get-out clause and wondered on satisfying this, would high street banks offer such a service?
I know about compound and how things can run away with the outstanding amount etc so don’t need any advice on that.
Thanks 🙏

Nebulous2

It's not at all clear to me what you're asking. Most lending, personal loans, mortgages etc depend on the borrower having enough income to repay them.

There are many people, with a valuable asset in their home who dont have the income to service traditional loans. For them a specialist, limited market in what is known as equity release* has developed. They tend to be expensive and difficult to escape from. So if you want to borrow to repay the loan you'll need the income to service it, or your in-laws may find they can only swap one expensive product for another.

*I really dislike that phrase. You aren't releasing anything, you're taking on expensive debt by giving security over your home.

Notebook

Ok. They have great pensions. Would this allow it?
If not, then possibly look at another equity release.

enthusiasticsaver

It is rare for lenders to lend long term to older people because of the high risk the6 May die by the end of a term. The exception is the sort of equity release they have obviously signed up to which is expensive and can wipe out the whole house value. Unless you are willing to take it over, not to be advised there is little to be done other than sell up and clear it.

MEM62

Notebook wrote: »

Ok. They have great pensions. Would this allow it?

If the income from those pensions is sufficient to service the repayments that may work - if they can get out of the equity release product that they are currently tied into.

Notebook wrote: »

If not, then possibly look at another equity release.

Equity release in most cases is either extremely ill-advised or the last resort of the desperate. There are very few cases where this is an appropriate product.

Your first step should be to obtain a settlement figure. At least then you'll know what you are dealing with.

Notebook

House worth 400k
Borrow 50
With int and no payment this will be 110 upon death. 20 years.

Nebulous2

Notebook wrote: »

Ok. They have great pensions. Would this allow it?
If not, then possibly look at another equity release.

That raises more questions, such as why they took it in the first place, and why they aren't paying the interest? Of course it could be they are quite happy with the current arrangement.

A rough guide is 50% of income as a maximum personal loan. So they would need to be on £100k to borrow £50k.

A midway house would be one of the lifetime mortgages, where they pay the interest from pensions each month so it doesn't compound. Again they'd have to commit to a reduction in disposable income to fund that.

Xbigman

Notebook wrote: »

House worth 400k
Borrow 50
With int and no payment this will be 110 upon death. 20 years.

And in 20 years time the house value could have doubled thus the percentage equity would remain about the same. This deal doesn't look that bad and if interest rates were to rise that fixed deal could then look pretty good. I'd leave this alone and let it run it course. If they have good pensions tell them to enjoy themselves whilst they can.



Darren