Short term equity release/bridging loan type options for pensioners - do such things exist?

K_S

lizards said:

K_S - are you saying it is possible to take out a bridging loan and not have to make repayments? Or potentially someone could take out a slightly bigger bridging loan and use the excess to make repayments?

@lizards With a regulated bridging loan (where it's secured against a residential property that the applicant lived or will live in), the interest has to rolled up into the loan and can only be paid at exit.

The reason for that stipulation is because if the borrower was obligated to make any payments before the end of the loan, then the lender would be obligated to ensure that they could afford to make those payments (thus bringing income into the picture) rather than using the exit (sale of old property) to pay off the whole loan. I hope that makes sense.

martindow

I'm not sure I understand what the plan is here.  Do you know why she is not happy living in a rented house near you?

If the problem is that she is unhappy living alone, for instance, that would not change if she owned or rented a house.

lizards

K_S said:

lizards said:

K_S - are you saying it is possible to take out a bridging loan and not have to make repayments? Or potentially someone could take out a slightly bigger bridging loan and use the excess to make repayments?

@lizards With a regulated bridging loan (where it's secured against a residential property that the applicant lived or will live in), the interest has to rolled up into the loan and can only be paid at exit.

The reason for that stipulation is because if the borrower was obligated to make any payments before the end of the loan, then the lender would be obligated to ensure that they could afford to make those payments (thus bringing income into the picture) rather than using the exit (sale of old property) to pay off the whole loan. I hope that makes sense.

Thank you, that does make sense!

lizards

martindow said:

I'm not sure I understand what the plan is here.  Do you know why she is not happy living in a rented house near you?

If the problem is that she is unhappy living alone, for instance, that would not change if she owned or rented a house.

The rental market is super hot near me which meant properties were going fast with multiple offers. She has a cat and mobility issues which ruled out a lot of places automatically. As a result, she couldn't be too picky, and as she was still the other side of the country, I had to do viewings for her. The house we managed to secure to rent is in a good location, and they'll accept her cat, but she really would not have picked this house for herself if there had been other options at the time. It's a fairly modern build (she's used to old, bigger houses) and she describes it as a "doll's house" with the small room sizes, cupboards etc, with cheap white goods, a 30 year old inefficient boiler, and the living room doesn't appear to get much light.

I blame myself to a certain extent, but thought she'd be able to tolerate it if it was temporary; but every day she says how unhappy she is there. The house she will eventually buy will be one she has chosen and viewed herself this time, especially now the sales market round here has cooled a lot in recent months so she'll have more options than rushing to secure a rental in a landlord's market.

peterhjohnson

theartfullodger said:

Recently flogged off my late brother's house, he had equity release, usurious and immoral interest rates.. 

Equity Release did used to be very expensive and inflexible. It's still not the cheapest but assuming the OP can overcome the "bridging" aspect of this move, ER could be useful. 

The usual ER scenario is an older person not planning to move but simply raising cash against part of the equity  in the current house. However, it is also possible to use some of the equity in a house you want to buy! Typically, the older person will move to a more expensive property and make no repayments while they are alive.  Of course, when they die, their Estate will be smaller than if they had not made that move. This article has more details https://www.equityreleaseenquiry.co.uk/equity-release-purchase.php

lizards

peterhjohnson said:

Equity Release did used to be very expensive and inflexible. It's still not the cheapest but assuming the OP can overcome the "bridging" aspect of this move, ER could be useful. 

The usual ER scenario is an older person not planning to move but simply raising cash against part of the equity  in the current house. However, it is also possible to use some of the equity in a house you want to buy! Typically, the older person will move to a more expensive property and make no repayments while they are alive.  Of course, when they die, their Estate will be smaller than if they had not made that move. This article has more details https://www.equityreleaseenquiry.co.uk/equity-release-purchase.php

That's very interesting, and not something I knew was possible! Thanks for that, I'll investigate it further just in case it might be an option.

Slithery

lizards said:

peterhjohnson said:

Equity Release did used to be very expensive and inflexible. It's still not the cheapest but assuming the OP can overcome the "bridging" aspect of this move, ER could be useful. 

The usual ER scenario is an older person not planning to move but simply raising cash against part of the equity  in the current house. However, it is also possible to use some of the equity in a house you want to buy! Typically, the older person will move to a more expensive property and make no repayments while they are alive.  Of course, when they die, their Estate will be smaller than if they had not made that move. This article has more details https://www.equityreleaseenquiry.co.uk/equity-release-purchase.php

That's very interesting, and not something I knew was possible! Thanks for that, I'll investigate it further just in case it might be an option.

Bear in mind that the additional 3% SDLT will still be due.
The only way that your mother can get round this is by selling the current property before purchasing a new one.

lizards

Bear in mind that the additional 3% SDLT will still be due.
The only way that your mother can get round this is by selling the current property before purchasing a new one.

Yep, definitely not forgotten that! Ideally she could sell it first, and then the whole question becomes a moot point. We're certainly going to try our best regardless.

steve866

Why does she need to buy in the next 1-2 months?

Is the only reason she can’t stay in the rented until she can sell the house because of the small cupboards, lack of light etc or am I missing something?

lizards

That is some of it, she's very depressed, and needs to feel there's an end in sight with somewhere more permanent to live - she was not in a great place mentally when she moved anyway after dealing with a particularly rough hand of cards in life and this isn't helping. As she knows she won't be staying in our current location long, she's not interested in trying to find new friends etc as there's little point, and she's a very sociable person usually. It's really important to her to feel finally settled somewhere rather than in limbo.

The rent is also really high (£1500/month), though she is tied into the contract until November. If she hasn't found somewhere by about July though, it's quite probable due to the amount of time it takes for the moving process that she'll be losing £1500/month from her capital as she won't be moving before November.
 
There's also the fact we're moving ourselves, as long as things keep going to plan, and will go from just round the corner to an hour round trip so she'll feel more isolated as I won't be able to just pop in any more. Basically, the sooner she can get an offer in on a place and knows the end is in sight, the better!