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My father took out an equity release in 1999. This is a compund interest of 7.5%. He passed away and now the debt is owed by my mother. There is a penalty for early payment which is tied to guilts. They really new nothing about all of this and now looking into paying it off it seems that as it was a life time mortguage there will be a sum retained by the lender (which has changed due to the original company being sold) till the death of my mother. So even if she wanted to she cannot completly pay of the debt. Luckily the equity in the house they have oened since 1973 has increased and she could do this on its sale. even though the compound interest has increased to frightening levels. It seems unfair that one cannot completely clear a debt and pay an early payment penalty. . I am not sure if there is any way out of this situation Any ideas?
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I suspect your father took out the money because he needed to and the way equity release operates is that you don’t make repayments and the interest owed is rolled up and added to the amount required to clear the debt.
there may be options to transfer the debt to a new property if your mother wants to move. The alternative is to clear the debt.
I don't have experience of equity release but your parents' experience sounds really awful. And it would be interesting to know what (if anything) your mother signed previously that makes your father's debt now her debt. That needs investigating.
For help and advice, your Mum, or you if you are helping her, could do much worse than contact StepChange, one of the free debt help charities. There's information in the following link -
I have used StepChange myself in the past and found them to be really friendly, helpful and knowledgeable. Their help is free.
Also Citizens Advice might be able to help - https://www.citizensadvice.org.uk/
I do hope that you manage to get this sorted out, it's very worrying for you and your Mum. But one of the first things to find out is - did the debt actually pass from your father to your mother, if so how. StepChange can help with that.
All the best to you and your Mum.