Equity release query 27 April 2022 at 1:46PM in Over 50s MoneySaving 3 replies 225 views

katdalou

My parents situation is such that they are both over 70 and need to free up some money from the family home whilst still living there. If they did equity release, what happens if:
1. A few years down the line they choose to sell that house before they die eg. If they had to move into residential care home and sold the house to help pay for those care home fees. Can you pay all ER back early? 
2. The housing market crashes and when the house is sold, it is worth less than the amount owed? If both parents have died, would the living children have to pay the difference/shortfall or is it just cancelled out by parents’ deaths even if all estate assets don’t cover the amount owed? 

Thanks in advance for any answers. 

MovingForwards

Short version:

1. Yes

2. Need to get permission from the ER company to sell the property for less and confirmation they'll accept that figure.

Usually takes a lot of marketing over a long period of time, proof of trying to sell, with price drops sufficient to cover their debt, proof from EAs there's been a downturn and letters backwards / forwards between yourself and the ER company.

Albermarle

. A few years down the line they choose to sell that house before they die eg. If they had to move into residential care home and sold the house to help pay for those care home fees. Can you pay all ER back early? 

It is a good question to ask, but be aware when planning ahead that most older people do not actually go into a care home , so the chances of them both needing to go into a care home, are not as high as is often perceived by the public.

Browntoa

If they do require care sooner rather than later then the equity release can be ignored and their financial worth calculated as if it never happened.

It's mentioned in small letters on equity release advertising