Lifetime Mortgage Inheritance Question

hallster11

Afternoon
My mother-in-law (80) has a lifetime mortgage/equity release against her house.  My wife is the sole benificiary of her mothers will.  We have always had a thought process that we would end up living in their family home upon her mothers death. I don't know much about lifetime mortgages as we've only recently found out the MiL and late husband took one out which is now up to £60K.  It appears that upon the MiL death the house will be sold with the mortgage lender taking their amount owed with the rest (probably around £140K at the moment) being left to my wife - is that right?
What are some of our options should we decide to make it our home in the future. Change of name on the mortgage (I realise that could have implications should the MiL need to move in to a care home)? Pay the equity release off? Buy the house off the MiL?
Any ideas would be much appreciated?
Thanks in advance. 

user1977

The house doesn't have to be sold after death, but the executors will need to repay the lender somehow. You could leave things as they are and still take on the house after death if you can find the money at that point to pay off the mortgage.

hallster11

Thanks user1977.
That could be an option. We are mortgage free in a house worth approx £130k so the sale of that would produce enough funds even though the equity debt goes up by £3K a year (incl interest).

Thrugelmir

Who are the named executors of the estate? Be their fiduciary responsibility to discharge debt.  

MWT

Talk of executors would seem to be somewhat premature, and keep in mind that death is not always the trigger for the need to repay the loan, these days going into long-term care can often be the trigger, so at that point talk of executors is not relevant.

A better question right now would be is there a Lasting Power of Attorney in place as there may come a point where it will be necessary to manage her assets for her benefit and deal with the loan repayment.

The time to set one up is while she is in good health and competent, if you wait until one is needed it is too late to get one without involving the courts...

The answer though is still the same, the loan has to be repaid upon death or entering long-term care and that can be from the proceeds of the sale of the house, or from other assets, but typically it would be the house.

With the way care costs are handled these days that might also require the house to be sold of course and things like concessionary sales are unlikely to be an option due to the rules around deprivation of assets...

getmore4less

I would find out what the terms of the ER are as that may offer other options than a waiting game..

What rate is the interest accumulating?
(at £3k a years thats ~5% in 5 years £79k  10years £101k )

Can the interest be paid without penalties?
Can any capital be paid without penalties?
if there are penalties(some are very high)  do they go down(time limited) or get eliminated by certain triggers?

Also what happened when dad died,  did it all go to mum or perhaps a life interest was set up for his part.

Since the plan is to keep the property there may be options like
Raise a mortgage on your house to pay off the debt at a lower rate than the ER(that can be secured to avoid a care grab)
Pay the interest to stop the debt growing.
Pay down the debt
...