equity release effecting share in house

LETSFORMABAND

Looking for some advice 

My father owned half his house 50/50 with his partner. My father recently passed away and i have inherited half the house. In his will it states that the occupant (his partner) can remain in the property until she passes away or decides to sell, at which point i will inherit half the property value.

My father and his partner took out an equity release lifetime mortgage a couple of years ago which they have been repaying. However, If they do not make the payments then compound interest applies and essentially the lender take the value of the house when sold or the occupant dies.
 
My question is if his partner does not pay the interest as a minimum the lender will acquire greater value in the house. However does this apply to my owned half of the house? If she doesnt pay will i lose out on my inheritance or will the lender only take her 50%, as i am not named on this equity release.


Thank you

molerat

The mortgage is on the whole property and it will be down to the executors of the 2 wills to fight it out over any non payment repercussions on the value, the lender will have no interest in that side of it. Could turn messy if the 2 families don't see eye to eye. Who is set to inherit the other half ?

Hoenir

The debt is joint and several. Your current share of the property value is 50% of the net equity when it is sold not the gross value. 

LETSFORMABAND

The executors of the will are myself and my dad’s partners son. I think he did that as I assume I am joint executor of her will, as it’s mainly
linked to the property.

Her kids are set to inherit her share.

I have already been asked to contribute to the repayment of this mortgage as she can’t afford it on her own without my dads pension (I know this should have been thought out prior
to taking it out)

I feel aggrieved about this as I don’t even think my dad wanted to take it out in the first place.

I will get legal advise to protect my share, however I thought I’d see if anyone on here had heard of or dealt with a similar issue, as this is all news to me

MWT

LETSFORMABAND said:

My father and his partner took out an equity release lifetime mortgage a couple of years ago which they have been repaying. However, If they do not make the payments then compound interest applies and essentially the lender take the value of the house when sold or the occupant dies.

You need to understand the nature of the equity release product they have taken, only then can you understand the risks you are exposed to in this situation.

They may well have been repaying the loan but that doesn't mean they were obliged to repay the loan or even to repay the interest...

As for protecting your inheritance, the only thing you can be sure of is that the remaining partner cannot increase the amount borrowed or drawdown any remaining reserve that might originally have been agreed, or created by the repayments.

LETSFORMABAND said:

I have already been asked to contribute to the repayment of this mortgage as she can’t afford it on her own without my dads pension (I know this should have been thought out prior
to taking it out)

Once you know the answer to the question above you can consider what the impact of doing or not doing this would be...

If the proposal is for you and her son to split the interest payments between you and her side of the family to prevent the interest from compounding, that is one idea but obviously comes with no guarantees on how long it would go on for, and how much interest would be likely to accrue if you didn't...

LETSFORMABAND said:

I will get legal advise to protect my share, however I thought I’d see if anyone on here had heard of or dealt with a similar issue, as this is all news to me

Do take advice, but there really isn't a lot you can do as your father left you 50% of the net value at the end of her use of the property (which can also be triggered by her having to go into long-term care), not 50% of what it is worth now. Had he not wanted to leave you with an encumbered asset then presumably there might have been more thought given to life insurance which could be used to clear the loan, so do check if there is indeed any life insurance.

 
 

theoretica

Who inherited the rest of your father's estate?  Because he didn't have only half a house to leave - he had half a house and half a mortgage, and maybe money and other possessions.  If his estate cannot afford to pay back half the mortgage then you cannot inherit half the house mortgage free.

LETSFORMABAND

theoretica said:

Who inherited the rest of your father's estate?  Because he didn't have only half a house to leave - he had half a house and half a mortgage, and maybe money and other possessions.  If his estate cannot afford to pay back half the mortgage then you cannot inherit half the house mortgage free.

My dad didn’t have much cash but it’s split 50/50 between myself and his partner. It’s a life time mortgage for 20k that was taken out.

im not bothered about paying the mortgage back, I’m bothered about her not making the interest payments as that will impact my inheritance 

mjm3346

She should be advised to stop paying as soon as possible and simply let the mortgage increase without worrying about it 

theoretica

I'm afraid I don't see that she has a legal need to pay all the interest payments, unless your father's will stated that.

MWT

LETSFORMABAND said:

im not bothered about paying the mortgage back, I’m bothered about her not making the interest payments as that will impact my inheritance 

Unless the equity release product they took requires that, she has no obligation to do so, nor would she be best advised to make any further payments for either interest or capital reduction unless it is required by the terms of the loan.

Is the £20k the current balance or the original loan?

Check the current balance and the interest rate then you can see if this is really a big problem or not, but I would keep in mind that your father cared enough for her to make provision for her to stay in the property as long as she needed it, your interest in it only begins where hers ends...