Worth or possible to buy back the equity release of my parent's property?

Spint

Apologies if this subject is best served in another category, it seemed to be the most relevant.

I'm just starting to look into this idea and I currently have very little understanding of how it works, but hope you can give me starting points or the right direction to at least understand if it's viable to take it further.

My Dad took out the maximum equity release on his property. My Mum mentions to me about how the interest is increasing and is worried there won't be much left for me and my two brothers.

One of my brothers has some savings and so do I that's sitting in ISA accounts. I know you have little information to go on, but could it be worth buying back the equity with our savings?

As said, I'm just starting to look into and I have very little understanding of how this all works. One thing that might be useful to know is that the property should be worth less than the £325,000 inheritance tax.

What do I need to find out and understand, unless of course you can say it's a non-starter.

Thanks very much and hope you can help.

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/6655166/worth-or-possible-to-buy-back-the-equity-release-of-my-parent-039-s-property

It's ultimately a mortgage so you can settle the mortgage early but like paying your normal mortgage off early there can be some modest penalties for doing so.

silvercar

Really depends on the size of the loan and the amount of equity, if there is already no equity left then it may cost more to pay it off than the property is worth. In which case it’s not worth doing as most of these loans have a condition that they can’t claim more than the property value on redemption.

Then it’s a case of what you could all do better with the money? If you can gain a better return than the interest rate charged, it may be sensible to let it run.

MWT

https://forums.moneysavingexpert.com/discussion/6655166/worth-or-possible-to-buy-back-the-equity-release-of-my-parent-039-s-property

You need to know the current balance and the nature of any early repayment penalties.

The most recent annual statement will often show both of those figures.

The interest rate itself is unlikely to be going up as these products tend to be fixed for life, but as the interest rolls up the amount charged each year will increase.

Once you know the amount involved you can consider if it is something you want to do, but do check the current property value and consider what sort of impact a reduction in house prices might have as well as consider if you can make more with your ISA than you'd lose on the property.?

If you go ahead with this do make sure you have protected your investment to avoid issues later on if either parent requires long-term care.

Spint

Thanks very much for all your help and advice.

It's clear I've got a bit of homework and number crunching to do.

Chemistry777

Once you know the figures, you may want to just pay to the interest accrued on the lifetime mortgage each year. This way you the value of your inheritance should not decrease further and you will then know how much will be left owing at the end of the agreement which you can payoff and deduct from the inheritance.

MWT

A lot depends on just when this loan was taken out, so the interest rate could be anywhere form reasonable to extortionate by current standards, so that may play a part in the decision.

Exactly how much could be paid each year without triggering the penalties may also be a factor and will be part of the original T&Cs of course.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81887903#Comment_81887903

You should also consider how appropriate it is to divert your own savings into you parent's home, and the impact that has on your own immediate financial security.

From one of your past posts this does not appear to be on a particularly solid footing, and you should think very carefully about depriving yourself of funds you may need for yourself. At the very least you should retain an emergency fund of at least 1 year of your net earnings, after assisting with an equity release redemption exercise with your brother.

As you say, a lot of number crunching to do, but on both sides of the equation.