Father considering Equity Release (life time mortgage) - opinions sought

ClaraP

My father is looking to raise £40K against his house which is valued at £550K I am not keen on this plans however would welcome some advice on whether this is a low enough risk for him.  He has been quoted 2.5% compound interest and is 87 years old.

MWT

At his age and with such a low amount given his house value there is little reason to worry.

If he needs the money or even if he just wants it to make life better for himself it would seem like a sensible idea.

If you have specific concerns it might help to share them so people can give you more focused replies...

Linton

What do you see the risk to him to be?

At his age and an interest rate of only 2.5% it seems to me to be a good way of him getting some extra cash in his final years, if he wants it.  If he lives another 20 years, which is very unlikely, the amount repaid to the mortgage company would be about £66K.  So there would still be more than enough left in the house equity if for example it had to be sold to meet care home charges or he wanted to downsize.

euronorris

That's an LTV of just 7.27% (if the house value estimate is accurate). The interest rate is about right for the market and his age. There are many factors to consider, but based on what you have provided, there doesn't appear to be a large risk here for him.

Is he getting independent financial advice?

What type of equity release is it?

What is the early repayment charge if he wanted to repay it early?

Does he intend the service the interest? Does the product allow for it?

Gentleman of his age has an average life expectancy of 5.11 years, so, with compound interest he (or his estate) would owe £45,320. Even if he surpasses his life expectancy by another 5 years it only rises to £51,347.

Thrugelmir

ClaraP said:

I am not keen on this plans 

What's your objection? 

Mojisola

ClaraP said:

My father is looking to raise £40K against his house which is valued at £550K I am not keen on this plans

Can you raise £40k and lend it to your father?