Equity Release?

Cannyshopper

We own 2 properties, one worth approx. £145,000 with no mortgage and a second property worth approx. £175,000 with a interest-only mortgage of £70,000 which needs to paid off later this year. The 2nd property is timber framed which an older relative is living in. We don't really want to sell either property at the moment. We are both in our 70's and have no close family so no need to leave an inheritance. We would pay off the mortgage with the Equity Release payment.  Any help would be appreciated

Andreg

What Equity Release products have you looked at and what is the interest rate on them?

I wonder if you could charge the older relative rent and use that to pay the interest on a buy-to-let mortgage rather than Equity Release, if the interest rate were lower?  However your main motivation may be to run down your assets and maximise your standard of living, even at the expense of a higher interest rate.  If so, and you expect to stay in the same properties for the rest of your lives, then you appear to be the type of people that equity release is aimed at.

It's difficult to advise without knowing what other assets and income you and the older relative have, nor exactly what your aims are.

Veteransaver

You may find that equity release wouldn't give you enough to pay off the mortgage. Depends on your age but I think it used to be around 30% of house value, and interest rates have gone up so it may be lower now. 
You can potentially pay off the equity release later by selling the second property, though the charges (ie the setup fees plus the interest that has accumulated may make that an expensive option

MWT

Cannyshopper said:

We own 2 properties, one worth approx. £145,000 with no mortgage and a second property worth approx. £175,000 with a interest-only mortgage of £70,000 which needs to paid off later this year. The 2nd property is timber framed which an older relative is living in. We don't really want to sell either property at the moment. We are both in our 70's and have no close family so no need to leave an inheritance. We would pay off the mortgage with the Equity Release payment.  Any help would be appreciated

I may have misunderstood, but it sounds like you do not actually live in either of these properties?

If that is the case then they are not suitable for equity release from the majority of lenders as they require it to be your home, not a second property.

... and saying that, I'm not so sure that it isn't actually all of the lenders, as I'm seeing signs that there are no current lenders available for equity release on second homes.

Even if you are living in the £145k home, you will struggle to get close to £70,000 out of it at age 70...

Cannyshopper

Thank you for your replies.My wife and I do live in the cheaper property. Approximately what would be the most amount we could take out on this property?

MWT

Cannyshopper said:

Thank you for your replies.My wife and I do live in the cheaper property. Approximately what would be the most amount we could take out on this property?

It depends on the age of the youngest life, and the range you could get without too much effort would be from around £50k at 70 moving up to around £68k at 80.

There will be lenders willing to go a bit higher and that is something your advisor would help you with, and the advice is unavoidable as it is a requirement for all equity release products.

Most advisors will charge for the work they do and that can range from a few hundred to a few thousand, or in a very few cases it is free...

I would suggest you explore the possibilities with a free advisor like StepChange Financial Solutions, there is no fee and no obligation to proceed but at least you will get an idea of what is possible and make sure your property is suitable for equity release.

'Suitable' in this case includes no adjacencies that might impact an easy sale like commercial premises or electricity pylons for example...

Also the property needs to be in good decorative order and free from clutter, not to put too fine point on it, but the lenders are looking for property that can be quickly sold with no remedial work required and the state it is in now is being used to assess how well you are managing the upkeep as a guide to the future.

There are other requirements relating to type of construction, location etc. but the advisor can help you work through that.

Cannyshopper

Thank you very much for the helpful, informative information.