Equity Release guide discussion

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  • Darren_Amos
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    You do not have to pay off the mortgage unless you want to.
    If you want to move house and the property you are going to is acceptable then you can port your mortgage too, just as you can with a conventional mortgage
    However, Equity Release Lifetime mortgages are based on a Loan to Value in line with your age, so this could affect things.
    For example at 65 you might be allowed 30% Loan to value. You live in a £200,000 home and therefore borrow £60,000.
    A few years later (at 70) you might owe £75,000 and your house is worth £220,000. At 70 the maximum loan to value is perhaps 35%.
    If you move to a property that is worth £250,000 then you can port your whole mortgage as £75,000 is less than 35% of £250,000.
    If you instead downsize to a property worth £200,000 then your existing mortgage is more than 35% of £200,000 (37.5% in fact). You would usually have to repay sufficient from your sale proceeds to reduce the mortgage to 35%. In this case £5,000.
  • Darren_Amos
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    Yes interest rates can be higher, although they do start at around 3.8%.
    However, these are FIXED FOR LIFE. This means taking out an Equity Release lifetime mortgage at 65 the lender could be fixing your rate for 20 or 30 years, or even longer.
    So of course they are higher
    If you take out a conventional mortgage on a 2yr or 5yr fix then the 5yr fix will normally cost more. There are some 10 year fixes that are even higher.
    Couple that with the fact it's likely you'll be paying higher rates over the next 20/30 years, How many remember mortgage rates being consistently over 6% and even rising to 16% in the past. If you offered someone back then a 30 year fix at even 5% they would have snapped your hand off.
  • Darren_Amos
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    If someone takes 30% out of their property and they pay 5% interest then yes the debt rises., But so does the house value usually.
    If you borrow £30,000 on a £100,000 property (30%) you'll start with £70,000 equity.
    At 5% over 20 years you'll owe about £80,000, so even if house prices don't rise EVER you'll still have £20,000 left.
    If house prices only rise by 2% per annum average the house would be worth about £149,000 so you would have about the same equity
  • Darren_Amos
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    You can do Buy to Let but obviously loan to values mean you will require a bigger deposit than is required for a conventional Buy to Let mortgage.
    As with all equity Release the property needs to be acceptable, so flats might be more restricted.
    Note you cannot get Equity release without using a qualified adviser and solicitor, so it may cost you more. As you can get a conventional Buy to Let mortgage that runs to over 100 you'd be better served looking at that first, and any Equity release adviser would consider that option, just as I would
  • KPJ_0771
    KPJ_0771 Posts: 6 Forumite
    edited 21 February 2019 at 11:09AM
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    my idea is to use equity release to build a ground floor bedroon amd shower room, for access problems, would this be a decent situation for me, i have no serious need in worring about leaving an estate, but still looking for value for money/able to live on home.
  • b6204
    b6204 Posts: 12 Forumite
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    Could anyone advise me on how I can help my Mum to find out who she took Equity Release with for her property. She is trying to get her affairs in order and can't remember who the company was who she took the equity release with about 15 years+ ago. She has not been able to locate any paperwork connected with the ER and is becoming very stressed about what will happen in the event of her death. She owns the property outright. Thanks for your help
  • badmemory
    badmemory Posts: 7,791 Forumite
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    Have you tried land registry as the property should have a charge on it - to stop it being sold without the equity release co getting their money back?
  • b6204
    b6204 Posts: 12 Forumite
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    Thank you for your advice. I have tired Land Registry and have found the company. We are now waiting for information re the ER for my mum. Many thanks.
  • Granny10
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    Hello,

    We have a 35% share (worth £130,00) in a shared ownership property and would like to get our daughter and husband a deposit for a house as they are expecting a baby.

    They are both teachers and earn enough to pay a mortgage but earn a little too much to be considered for shared ownership themselves. They are also paying off hefty student loan debts.

    They have some savings and we would only need to raise £15,000 to help them get a deposit.

    Does anyone know whether we would be considered for Equity Release?

    I have a 94 year old mother from whom I will eventually inherit several times this amount and our house is in a popular area of South East London near to Green Belt so we expect it to keep increasing a little in value.

    Would we pay extortionate fees to release this amount of equity and could we pay it all back and clear the debt within a few years when I do inherit?

    Would be very hateful for any advice.

    Thank you.
  • Browntoa
    Browntoa Posts: 49,300 Forumite
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    Had a quick look and not even sure if it's possible with a shared ownership property

    There are fees of around £1500 to arrange

    You can pay it back at any time but interest is rolling up at an unattractive 5-6% until you do

    It's an expensive way to release only £15000
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