Equity Release In part owned property

MelenHirren

My sister and myself own a property, all paid for - we are both in our late 50s.

I want to sell, my sister want to remain in the property.

Due to an illness, she is on universal credit and has no employment or savings, so remortgaging or buying me out isnt possible.

To save the upheaval of selling, she has suggested she speaks to a company that does equity release and see if they will pay me half of the house and have that as equity.
Does anyone know if this is possible?

Thank you in advance

GrumpyDil

Probably better getting this moved to the mortgages forum as you are likely to get more informed responses there. 

Assuming that you are not living there assume you are aware of the possibility of a sizeable capital gains tax liability? 

MelenHirren

Yes, I am aware but need the money releasing from the house. Thanks for your reply.

MelenHirren

My sister and myself own a property. 

MWT

In principle, yes, but the issue is going to be raising 50% as she would typically need to be over 70 to raise that sort of percentage, however ...

Please excuse the question, but is her illness 'life-limiting' ?

The lenders do take ill-health into consideration when determining how much they will lend on a property, normally someone in their late 50's would only be able to access around 1/3rd of the value of the property, not half, so if she seeks advice on this it is important to mention her health.

The property itself has to be suitable as well, in terms of location, construction, state of repair etc.

Getting the necessary advice for equity release can be costly but the range is from zero to a few thousand, so probably best to start with one of the zero options to see how practical this is for her specific circumstances. I'd suggest talking to StepChange as they have a financial arm that will provide advice on equity release and not charge her a fee.

El_Torro

If you equity release half of the property (I don't know if that's possible, let's assume it is for now) then you still have to pay back the interest. The bank won't just give you the money, it's like taking out a mortgage. Presumably your sister won't make the payments, are you willing to? 

If you sell can your sister afford to buy another property with her half of the money? It won't be as nice as where she currently lives but if she can't afford to live there then that's the way it is. 

MelenHirren

She had a car accident a few years ago which saw many broken bones neck and back etc so now needs a walking stick and doesn't have a lot of movement at one side, she is on heavy pain killers and the prognosis is more long term mobility issues and pain rather than progressive illnesses.

Thank you for your advice.

eddddy

El_Torro said:

If you equity release half of the property (I don't know if that's possible, let's assume it is for now) then you still have to pay back the interest. The bank won't just give you the money, it's like taking out a mortgage. Presumably your sister won't make the payments, are you willing to? 

If you were making monthly interest payments, that would be more like a conventional mortgage - rather than equity release.

Generally, with equity release, you don't make monthly payments. Instead the interest just gets rolled up.

And you pay off the whole lot - original loan plus accumulated interest - when the property is eventually sold (typically when you die, or go into care, or decide that you want to downsize).

But some equity release schemes might allow you to pay some/all of the interest if you want to.

FreeBear

eddddy said: Generally, with equity release, you don't make monthly payments. Instead the interest just gets rolled up.

And you pay off the whole lot - original loan plus accumulated interest - when the property is eventually sold (typically when you die, or go into care, or decide that you want to downsize).

And often, the price realised on selling fails to cover the full cost of the loan & interest.

Quite how this would work with a shared property, I really wouldn't like to comment.

MWT

FreeBear said:

eddddy said: Generally, with equity release, you don't make monthly payments. Instead the interest just gets rolled up.

And you pay off the whole lot - original loan plus accumulated interest - when the property is eventually sold (typically when you die, or go into care, or decide that you want to downsize).

And often, the price realised on selling fails to cover the full cost of the loan & interest.

Quite how this would work with a shared property, I really wouldn't like to comment.

I certainly wouldn't say 'quite often' these days it is very unlikely, and the issue of a shared property doesn't really come up as you can only get equity release products with all the owners on the loan and living in the property.

In this case the remaining sister intending to live in the property would use the equity release loan to buy out the other sisters share, so she would be the only owner.

We've already covered more on this here: 

https://forums.moneysavingexpert.com/discussion/6573658/part-ownership-and-equity-release#latest

(Thanks for the merge)

... and it is unlikely that it will be possible to release 50% of the value given the age of the remaining sister.