A couple of questions on equity release products please

ferry

Approaching the time where ER may be an option for us, not sure if rules are generally the same for each provider but can anyone help on the following:
1. Will any residual mortgage HAVE to be cleared as a condition of the deal? We currently have 1st & 2nd charge mortgages and would prefer to keep the 2nd as it is as its on a good rate
2. Does it work like every mortgage where you would only qualify if you have good credit history?

Thanks

MWT

ferry said:

1. Will any residual mortgage HAVE to be cleared as a condition of the deal? We currently have 1st & 2nd charge mortgages and would prefer to keep the 2nd as it is as its on a good rate

All existing mortgages will have to be cleared as part of the transaction, the ER lender will not want any other loans remaining secured against the property.

ferry said:

2. Does it work like every mortgage where you would only qualify if you have good credit history?

ER lending is focused on the property, its location (adjacencies to commercial premises etc.), construction, current state of repair and signs of clutter, it has nothing to do with your credit history as there are no repayments anticipated if you are taking one of the options with rolled-up interest and no mandatory repayments.

Do keep in mind that the offer you receive will be based on the youngest life, not the oldest if the property is in joint names.

Do also look at all of your options before jumping straight to ER as the answer as it really should be your last choice, not your first...

ferry

Thank you for your reply.
As we we are exclusively looking to release funds in the cheapest and quickest way possible, only other way I can see us doing this is by downsizing which we really prefer not to do? 

Have we missed another option maybe?

Thanks as always

MWT

Equity release is often far from cheap by the time you have paid the advice fee, but there are advisors such as Step Change Financial Solutions that will make no charge for the advice and rely on the payments made by lenders to fund their work.

Most other advisors will still be getting a payment from the lender, but they will also charge a fee on top...

ferry said:

Have we missed another option maybe?

Downsizing should always be considered, but depending upon age, guaranteed retirement income, property value and the amount you need to release, there are other options like a Retirement Interest Only (RIO) mortgage, or even a standard mortgage as there are lenders who will consider terms up to 80 years of age if the nature of the employment is credible (desk job, not manual labour for example).

If you want to share some rough numbers regarding the property and how much you need together with your ages then it may be possible to make other suggestions...
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Keep_pedalling

ferry said:

Thank you for your reply.
As we we are exclusively looking to release funds in the cheapest and quickest way possible, only other way I can see us doing this is by downsizing which we really prefer not to do? 

Have we missed another option maybe?

Thanks as always

It would help if you provided some detail.

How old are you? Value of house? Current secured debt? How much are you looking to raise?

ferry

I see, thank you. 
Property value £475k , current bal £100k. Both 53 yrs old now so a couple years short

2nd charge bal £32k 
Ideally looking to now clear both so both balances will be slightly less at 55.

No real valuable pensions, maybe total of £50k 
I have no idea is acheivable to release but around £150k would be ok just to be 'debt free'? 
I had used some online calculators but the range of what we could release varies wildly

Thank you

MWT

I really would suggest that you look at other options to get the mortgage balances down before you consider equity release...

How much longer do you have on the current term of the two mortgages?

At age 55 with that home value you are going to struggle to get close to even £100k, and it is going to be expensive, as much like a normal mortgage, the interest rates reflect the LTV as well as your age... That may not worry you as the interest will just roll-up until the last life enters long-term care or dies, but what it means is that at the youngest age possible you will have used what may be your only chance to get equity out of the property, as your chances of any future further advance will be low, and that may severely restrict your options for funding care in later life or just supplementing your pensions...

ferry said:

No real valuable pensions, maybe total of £50k 

Do you mean £50k in a fund, or that you expect your joint pension income to be £50k PA?

ferry

Unfortunately £50k in the fund.
Thank you. All the above has been noted.
 Now I understand why downsizing may be an important consideration

MWT

Where you go from here really does depend on the remaining term on the two secured loans and your employment prospects over the next 14/15 years you have before reaching state pension age, and beyond that as well as I mentioned earlier...

As long as you can both work, that is still a very decent amount of time to at least significantly reduce the loans, if not eliminate them, so don't rush for down-sizing either.

This may be a good time to talk to a good mortgage broker and see what they can do to locate alternative products for you if the current loans are reaching term soon...