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Equity Release

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Not sure if this is even possible as a private individual. We have friends who want to release some equity or at least to get an income from the property which they have on an interest only mortgage. I had thought of giving them an amount every month so that effectively I will be 'buying' a very small % of the property or at least its value - no string attache and wouldn't charge interest on this. When the time comes and they sell, I or my daughter would get back the amount I had paid and the resultant increase in in the value based on the % I had 'bought'. I get this may be complicated but before we look at the detail, wondered if it was even possible.
Thanks
Paul

Comments

  • MWT
    MWT Posts: 10,273 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    I don't see why it wouldn't be possible, but the devil is in the detail and how you calculate the percentage owned and secure your interest in the property.
    Before even going there though how much equity do they currently have in the property and how long is left on the interest only mortgage?
    Is there a plan to pay off the mortgage other than by selling the property?
  • tacpot12
    tacpot12 Posts: 9,261 Forumite
    Ninth Anniversary 1,000 Posts Name Dropper
    If you can agree a formula for the percentage you will own with your friends, a solicitor will be able to help you create an agreement and codify the formula. The most important thing in any agreement will be how to end it when the situation changes, such as them needed to go into care, or one of them dying and the other wanting to move into smaller accommodation. The solicitor will help you put a charge on the property so that you are guaranteed to get your money back.

    Generally it is better for people to use commercial organisations rather than friends for loans/mortgages/equity release, because the commercial organisations are experts and they treat it like a business.  Your friends should at least have a look at a lifetime mortgage from Legal & General. It seems to be a flexible product from a reputable company. If my parents wanted an equity release solution, I would point them to L&G first. 
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
  • You're quite right - the devil is very much in the detail. I would say they have around £127,000.00 outstanding on an interest only mortgage on a property valued at £300,000.00.  
    Thanks
    Paul
  • tacpot12 said:
    If you can agree a formula for the percentage you will own with your friends, a solicitor will be able to help you create an agreement and codify the formula. The most important thing in any agreement will be how to end it when the situation changes, such as them needed to go into care, or one of them dying and the other wanting to move into smaller accommodation. The solicitor will help you put a charge on the property so that you are guaranteed to get your money back.

    Generally it is better for people to use commercial organisations rather than friends for loans/mortgages/equity release, because the commercial organisations are experts and they treat it like a business.  Your friends should at least have a look at a lifetime mortgage from Legal & General. It seems to be a flexible product from a reputable company. If my parents wanted an equity release solution, I would point them to L&G first. 
    The trouble is neither of them are working and not in the UK so not sure if or how they could refinance at all.
  • MWT
    MWT Posts: 10,273 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    edited 12 January 2021 at 7:51PM
    tacpot12 said:
    Your friends should at least have a look at a lifetime mortgage from Legal & General. It seems to be a flexible product from a reputable company. If my parents wanted an equity release solution, I would point them to L&G first. 
    With the added info that there is about £127k loan outstanding on a £300k property, unless they are over 80 they would struggle to even clear the existing mortgage with L&G and they would have to be able to redeem the existing mortgage in full to make use of a Lifetime product...
    That would leave nothing for the OP to 'invest in'...


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