Equity Release

lynnegrundy

My parents took an equity release in 2006 and the interest rate is 6.2%.  Whilst the amount of equity released was minimal the amount owed is now quite substantial.  The company has been contacted for advice on how the interest rate can be reduced and the only option available is to take out another equity release and pay off the existing one which we would have probably done.  However, this option is only available up to the age of 85 and my parents are both 88.  Where can I go from here?

MWT

There are lenders who will consider people over 85, but a lot would depend on the numbers.

Do you know the current value of their property and the rolled-up total that is currently owed?

If they wanted to pay off the entire sum are there early redemption charges to add on?

Does their plan allow partial repayments without ERC?

Browntoa

The only option not mentioned is to sell the property and settle the debt now rather than let it roll up.

Equity loans are often capped at maximum amount , say 75% of the property value , if this has Been reached then there's probably little point in doing anything

MWT

Browntoa said:

Equity loans are often capped at maximum amount , say 75% of the property value , if this has Been reached then there's probably little point in doing anything

Was that common 15 years ago though?

Inheritance Protection is certainly a thing these days but even now I'm not sure how often people take it though...

Clearly it would be helpful if the OP could check the features and options in the agreement their parents signed.

lynnegrundy

Hi everyone thanks for your comments.  Yes parents had considered selling but they have lived their for 60 years, its a bungalow which my father built it so we have ruled this out due to the stress it would cause them.  There are no early redemption charges so this is not an issue.  I think the preferred route is looking at another lender with a lower interest rate to pay off the existing commitment.  The amount owed is about a sixth of what the house is valued at.  Once again thanks to all who responded.

dunstonh

Go to an IFA or mortgage broker that deals in equity release.    Do not go direct to the existing lender as they will only offer what they can offer.  Not what others have available.   Equity release has changed an awful lot since 2006.  Rates nowadays are comparable with mortgage rates.  So, a switch could well be a good outcome.