Equity Release - tenants in common

mat1964

My mother (84) lives in a flat in London worth about £900k-£1000k.  Her cousin helped her buy it back in 2002 and contributed 20% of the purchase price.  This 20% is now owned by his (newish) wife who inherited it when he died last year.

My mother would like to release about £100k in equity through a lifetime mortgage to help her pay living costs (service charges/council tax etc) as she lives on quite a small private pension plus the old state pension.

I spoke to a provider who said that equity release would not be possible, even with the permission of the owner of the 20%, as this person does not live in the property and for an equity release product for tenants in common, both owners need to live there.

Does anyone have any ideas on how we could do this?  If not a life time mortgage, then a £100k interest only mortgage would be ok, but I don't think we would qualify for this either.  She does not want to sell the flat.  Any thoughts appreciated.  

MWT

It is a general requirement for equity release that the owners live in the property as their main residence and with joint owners it is the earlier of the entry into long term care, hence leaving the home empty, or demise, of the last survivor that triggers the requirement to repay the loan.

How old is the late cousin's wife anyway?

As long as your mother does not own 100% of the property she is probably stuck as it sounds like she may not pass the affordability test for a RIO product (but you should check).

Hard to get creative with a solution here as things like gifting the 20% back to your mother with provisions in her will to recognise that and return it would be complex and fraught with uncertainty.

No possibility for the 20% owner to buy a further percentage of the house from her I suppose?

 

mat1964

thanks.  The late cousins wife is around 90 I think - and no possibility of her buying extra.

getmore4less

Who will inherit the 20% when that owner dies.

Looking like those inheriting that and the those getting the other 80% might need to dip into their pockets to help out.

MWT

The only creative solution I can come up with is for your mother to buy back the 20% from the late cousin's wife using funds she can get through the equity release...

She will need to release more than she had intended, but she will be getting back the 20% at the same time...

Keep_pedalling

With that value of house, downsizing would seem to be the obvious option.

MWT

Keep_pedalling said:

With that value of house, downsizing would seem to be the obvious option.

Given it is London, depending on location, it may not be as practical as it would be with that value elsewhere.

Also, she is 84 and doesn't want to sell/move...

As long as the owner of the 20% is willing (and competent) to sell then it should be possible to do this with an equity release.

mat1964

MWT said:

The only creative solution I can come up with is for your mother to buy back the 20% from the late cousin's wife using funds she can get through the equity release...

She will need to release more than she had intended, but she will be getting back the 20% at the same time...

Yes that is the only one I have come up with so far.  It's the most expensive option, but if nothing else works.

Keep_pedalling said:

With that value of house, downsizing would seem to be the obvious option.

If she was happy to move, I wouldn't be doing this thread.  She's 84, not in great health and wants to stay in her flat.