Equity release to pay debt

sourcrates

She owns the flat so a DRO is not an option.

billy2shots

Thanks for all the advice everyone.

Something I’m slightly confused with is the fact that transferring unsecured debt to secured debt has been mentioned a couple of times and ‘defaulting on secured debt’.

How can she default? The company gives a lump some and this is then paid back (plus interest compounded) on death or if she moves into a care home the the flat is sold.

I will give her the details of the contacts listed here and remind her to prioritise her service charge although she can prioritise all she wants, she won’t have the money.

poppy10_2

billy2shots wrote: »

How can she default? The company gives a lump some and this is then paid back (plus interest compounded) on death or if she moves into a care home the the flat is sold.

You are thinking of a lifetime mortgage. Equity release typically means taking out or increasing a normal mortgage on a property, with the usual monthly repayments to be made.


If she wants a lifetime mortgage (in which you don't make any repayments and debt is compounded until she dies or moves into care), then at her relatively young age she will only be able to borrow a very small fraction of the value of her flat, if they allow the mortgage at all.

middleclassbutpoor

I can see what she doesn't want to do...

What does she want?

I would look at the 'drama triangle' - there are some short videos on youtube which explain this but you appear to be playing the role of rescuer.

fatbelly

billy2shots wrote: »

Something I’m slightly confused with is the fact that transferring unsecured debt to secured debt has been mentioned a couple of times and ‘defaulting on secured debt’.

How can she default? The company gives a lump some and this is then paid back (plus interest compounded) on death or if she moves into a care home the the flat is sold.

Some of the posters are confusing this with release of equity by secured loan. A lifetime mortgage would be available to her as she is age 62. A home reversion plan may be more difficult.

Martin has some info here

https://www.moneysavingexpert.com/mortgages/equity-release/

billy2shots

Sorry if I have confused things. She couldn’t take any credit against her flat as she has a poor credit rating due defaulted payments. My terminology was wrong as by ‘releasing equity’ I meant selling some of her flat which I now know is termed ‘lifetime mortgage ‘. Whilst this isn’t exactly a great deal due to compound interest I thought it was an option due to a one hit debt wipe out.

Her flat would be roughly £160k - £180k in value and because of her age some calculators (sunlife etc) say she can sell a share between £10k and £25k.

[Deleted User]

billy2shots wrote: »

Sorry if I have confused things. She couldn’t take any credit against her flat as she has a poor credit rating due defaulted payments. My terminology was wrong as by ‘releasing equity’ I meant selling some of her flat which I now know is termed ‘lifetime mortgage ‘. Whilst this isn’t exactly a great deal due to compound interest I thought it was an option due to a one hit debt wipe out.

Her flat would be roughly £160k - £180k in value and because of her age some calculators (sunlife etc) say she can sell a share between £10k and £25k.

She gets a lifetime mortgage and then what? If she hasn't got her spending under control she will end up in exactly the same position as she's in now. There are drawbacks to lifetime mortgages such as being stuck with that property so say that she wanted to downsize further in the future or if the flat no longer met her needs (I'm thinking someone living in a flat above ground level who has mobility issues later in life being trapped due to a lifetime mortgage).

Would she even be eligible for a lifetime mortgage? Leasehold properties generally need at least 75 years remaining to be considered as security for a lifetime mortgage. She would need to check the T&C of any potential lifetime mortgage to find out what happens if her lease goes below 75 years and/or if she fails to make service charges.

I'm not saying that a lifetime mortgage isn't perhaps the right solution for her but it might not be the panacea it first appears to be, especially if she continues doing her best ostrich impression.