Retired release options from house
Discussion
My mum wants to release some money from her house.
She has a state pension, plus another pension, around £1600 a month.
74 and mortgage free house, around 250k worth.
Wants to release around £30,000.
I suggested a loan secured against the house or a mortgage, any suggestions. I know lifetime mortgages etc.
She has a state pension, plus another pension, around £1600 a month.
74 and mortgage free house, around 250k worth.
Wants to release around £30,000.
I suggested a loan secured against the house or a mortgage, any suggestions. I know lifetime mortgages etc.
I would tread very carefully with 'Equity Release'-a pit of vipers.
If you are in a position to help this is the route i would suggest
It very much depends on how the £30k is being spent imo. Blown on holidays don't raise it on the house. House improvements-will it add value?
Good luck
Pete
If you are in a position to help this is the route i would suggest
It very much depends on how the £30k is being spent imo. Blown on holidays don't raise it on the house. House improvements-will it add value?
Good luck
Pete
Lifetime mortgage, that you mentioned, seems like the way to go. No issue getting a £30K interest only mortgage on £250K, and repayments on say 5% interest rate would be £125/month.
If she lives 10 years, she'll have paid £15K in interest, and the £30K she'll still owes will come from the sale of her home. But that might be worth £300K by then, so still £270K for someone to inherit.
If she lives 10 years, she'll have paid £15K in interest, and the £30K she'll still owes will come from the sale of her home. But that might be worth £300K by then, so still £270K for someone to inherit.
mickythefish said:
Tbh to do house improvements clear some debt, and a little cash for emergencies.
Are you in a position to take a stake in her house? Effectively become the facilitator of her 'equity release'?Getting a mortgage or, God forbid, going to an Equity Release company is an expensive way to have some spare cash for emergencies.
In the 2024 Q3 market data, the Equity Release Council stated that average advertised lifetime mortgage rate was 6.89% in October 2024. And the rate is usually fixed for life.
Expensive money, especially when you take into account the "compounding" effect whereby interest is charged on the interest. In other words, the amount eventually owed against sale of the house can grow hugely bigger than £30,000 x 6.89% x number of years, depending on her lifespan.
Expensive money, especially when you take into account the "compounding" effect whereby interest is charged on the interest. In other words, the amount eventually owed against sale of the house can grow hugely bigger than £30,000 x 6.89% x number of years, depending on her lifespan.
Panamax said:
In the 2024 Q3 market data, the Equity Release Council stated that average advertised lifetime mortgage rate was 6.89% in October 2024. And the rate is usually fixed for life.
Expensive money, especially when you take into account the "compounding" effect whereby interest is charged on the interest. In other words, the amount eventually owed against sale of the house can grow hugely bigger than £30,000 x 6.89% x number of years, depending on her lifespan.
On a lifetime mortgage, there is no compound interest? On £30K, at 6.89%, interest is £172.25 / month. And that's what you pay, each month. So there is never any interest on interest. You owe £30K when you take out the mortgage, and you still owe £30K on the day you die. Meanwhile, the value of the house is hopefully increasing, so the LTV percentage is reducing. Expensive money, especially when you take into account the "compounding" effect whereby interest is charged on the interest. In other words, the amount eventually owed against sale of the house can grow hugely bigger than £30,000 x 6.89% x number of years, depending on her lifespan.
Your comment surprised me so I just googled the subject. Equity Release Supermarket say that yes, interest is compounded.
https://www.equityreleasesupermarket.com/news/deta...
Proceed with caution.
https://www.equityreleasesupermarket.com/news/deta...
Proceed with caution.
Panamax said:
In the 2024 Q3 market data, the Equity Release Council stated that average advertised lifetime mortgage rate was 6.89% in October 2024. And the rate is usually fixed for life.
Expensive money, especially when you take into account the "compounding" effect whereby interest is charged on the interest. In other words, the amount eventually owed against sale of the house can grow hugely bigger than £30,000 x 6.89% x number of years, depending on her lifespan.
Very true. I would always ask…."compare to what?" For example if you want interest roll up and or interest only at age 74 with possibly low income and some debt to clear there may not be any cheaper options. It is important to consider and compare all options and it may be that losing some equity to roll up of interest is the best for pure cash flow.Expensive money, especially when you take into account the "compounding" effect whereby interest is charged on the interest. In other words, the amount eventually owed against sale of the house can grow hugely bigger than £30,000 x 6.89% x number of years, depending on her lifespan.
[quote=Panamax]Your comment surprised me so I just googled the subject. Equity Release Supermarket say that yes, interest is compounded.
https://www.equityreleasesupermarket.com/news/deta...
Proceed with caution.
All plans regulated by the Equity Release Council allow voluntary payments of interest with no obligation to maintain them. Paying the interest obviously means there is no compounding.
A Retirement Interest Only mortgage is where interest must be paid each month. This means that any borrower has to satisfy the lender’s affordability criteria.
https://www.equityreleasesupermarket.com/news/deta...
Proceed with caution.
All plans regulated by the Equity Release Council allow voluntary payments of interest with no obligation to maintain them. Paying the interest obviously means there is no compounding.
A Retirement Interest Only mortgage is where interest must be paid each month. This means that any borrower has to satisfy the lender’s affordability criteria.
Sharks,
A couple I know (Very close relatives) took out a shared growth "plan" sixteen years ago with the firm you often see advertised on fb etc.
Their house *Four bedroomed modern detached) was valued at £160,000 at that time.
In return for 70% equity they advanced 40k, Therefore the couple retained 30%.
So, a week after the transaction the companies share in the property was 16k x 7 = 112k
The house is now worth around £280k, so their share is 196k at the current time,
The ironic thing is they only used 10k of the money to buy a new car, and still have most of the rest.
Read the contract ten times, and ten times again.
A couple I know (Very close relatives) took out a shared growth "plan" sixteen years ago with the firm you often see advertised on fb etc.
Their house *Four bedroomed modern detached) was valued at £160,000 at that time.
In return for 70% equity they advanced 40k, Therefore the couple retained 30%.
So, a week after the transaction the companies share in the property was 16k x 7 = 112k
The house is now worth around £280k, so their share is 196k at the current time,
The ironic thing is they only used 10k of the money to buy a new car, and still have most of the rest.
Read the contract ten times, and ten times again.
Wacky Racer said:
Sharks,
A couple I know (Very close relatives) took out a shared growth "plan" sixteen years ago with the firm you often see advertised on fb etc.
Their house *Four bedroomed modern detached) was valued at £160,000 at that time.
In return for 70% equity they advanced 40k, Therefore the couple retained 30%.
So, a week after the transaction the companies share in the property was 16k x 7 = 112k
The house is now worth around £280k, so their share is 196k at the current time,
The ironic thing is they only used 10k of the money to buy a new car, and still have most of the rest.
Read the contract ten times, and ten times again.
That doesn’t sound like a lifetime mortgage or equity release - that sounds like an equity sale and loan back or something dodgy - the key is good advice from someone independent to the company lending the money.A couple I know (Very close relatives) took out a shared growth "plan" sixteen years ago with the firm you often see advertised on fb etc.
Their house *Four bedroomed modern detached) was valued at £160,000 at that time.
In return for 70% equity they advanced 40k, Therefore the couple retained 30%.
So, a week after the transaction the companies share in the property was 16k x 7 = 112k
The house is now worth around £280k, so their share is 196k at the current time,
The ironic thing is they only used 10k of the money to buy a new car, and still have most of the rest.
Read the contract ten times, and ten times again.
TwigtheWonderkid said:
Panamax said:
In the 2024 Q3 market data, the Equity Release Council stated that average advertised lifetime mortgage rate was 6.89% in October 2024. And the rate is usually fixed for life.
Expensive money, especially when you take into account the "compounding" effect whereby interest is charged on the interest. In other words, the amount eventually owed against sale of the house can grow hugely bigger than £30,000 x 6.89% x number of years, depending on her lifespan.
On a lifetime mortgage, there is no compound interest? On £30K, at 6.89%, interest is £172.25 / month. And that's what you pay, each month. So there is never any interest on interest. You owe £30K when you take out the mortgage, and you still owe £30K on the day you die. Meanwhile, the value of the house is hopefully increasing, so the LTV percentage is reducing. Expensive money, especially when you take into account the "compounding" effect whereby interest is charged on the interest. In other words, the amount eventually owed against sale of the house can grow hugely bigger than £30,000 x 6.89% x number of years, depending on her lifespan.
There are some quite ill-informed people posting on here.
There are only 2 things that really matter here - the interest rate, and the attitude of the borrower.
With a lifetime interest only mortgage there are lending criteria and you have to pay the interest every month. It's a lot simpler to prove affordability if there's only one person living in the property.
With equity release, there are formulae regarding amount that can be borrowed, based on house value and age of the borrower. Interest does not have to be paid every month, but it can be. If interest is paid monthly, then the amount owed doesn't increase. If interest isn't paid, then it's added to the loan.
If an equity release loan has a lower interest rate than a lifetime I/O mortgage and the interest is paid every month, then it's a cheaper way to achieve the same aims.
Other products being discussed on here used to be called SAMs (shared appreciation mortgages). They've never been a good idea, and they've also never been equity release products.
Equity release is not necessarily a bad idea, if you have the discipline to pay the interest every month.
There are only 2 things that really matter here - the interest rate, and the attitude of the borrower.
With a lifetime interest only mortgage there are lending criteria and you have to pay the interest every month. It's a lot simpler to prove affordability if there's only one person living in the property.
With equity release, there are formulae regarding amount that can be borrowed, based on house value and age of the borrower. Interest does not have to be paid every month, but it can be. If interest is paid monthly, then the amount owed doesn't increase. If interest isn't paid, then it's added to the loan.
If an equity release loan has a lower interest rate than a lifetime I/O mortgage and the interest is paid every month, then it's a cheaper way to achieve the same aims.
Other products being discussed on here used to be called SAMs (shared appreciation mortgages). They've never been a good idea, and they've also never been equity release products.
Equity release is not necessarily a bad idea, if you have the discipline to pay the interest every month.
omniflow said:
There are some quite ill-informed people posting on here.
There are only 2 things that really matter here - the interest rate, and the attitude of the borrower.
With a lifetime interest only mortgage there are lending criteria and you have to pay the interest every month. It's a lot simpler to prove affordability if there's only one person living in the property.
With equity release, there are formulae regarding amount that can be borrowed, based on house value and age of the borrower. Interest does not have to be paid every month, but it can be. If interest is paid monthly, then the amount owed doesn't increase. If interest isn't paid, then it's added to the loan.
If an equity release loan has a lower interest rate than a lifetime I/O mortgage and the interest is paid every month, then it's a cheaper way to achieve the same aims.
Other products being discussed on here used to be called SAMs (shared appreciation mortgages). They've never been a good idea, and they've also never been equity release products.
Equity release is not necessarily a bad idea, if you have the discipline to pay the interest every month.
Equity release with roll up is not that bad an idea on a high value house if paying IHT is unavoidable- may as well spend it and die with some debt (in some instances)There are only 2 things that really matter here - the interest rate, and the attitude of the borrower.
With a lifetime interest only mortgage there are lending criteria and you have to pay the interest every month. It's a lot simpler to prove affordability if there's only one person living in the property.
With equity release, there are formulae regarding amount that can be borrowed, based on house value and age of the borrower. Interest does not have to be paid every month, but it can be. If interest is paid monthly, then the amount owed doesn't increase. If interest isn't paid, then it's added to the loan.
If an equity release loan has a lower interest rate than a lifetime I/O mortgage and the interest is paid every month, then it's a cheaper way to achieve the same aims.
Other products being discussed on here used to be called SAMs (shared appreciation mortgages). They've never been a good idea, and they've also never been equity release products.
Equity release is not necessarily a bad idea, if you have the discipline to pay the interest every month.
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