Equity Release

[barney4444]

We have been looking at raising some funds from our house that we own outright. Am not inclined to get involved with the pushy salesmen in snappy suits until we are bit nearer deciding.
As I understand it we could raise funds by having what would be a interest only mortgage, I would be grateful if anyone could tell me a sort of ball park figure of what the monthly payments would be if £30.000 was borrowed, and confirm that provided we met the payment every month we would never owe more than £30.000 to the lender, which if at a future date we repaid then the whole transaction would be over. Thanks in advance..

[ubasses]

If the interest rate was 3.5% you would pay about £90, but it is not that straightforward, the lender will want to know how and when you are going to repay the loan.
If you are looking for a lifetime equity release, it would be a good idea to read the following and get Independent Financial advice.
https://www.which.co.uk/money/pensions-and-retirement/youre-retired-working-on-benefits-equity-release/equity-release/lifetime-mortgages-ak6320x3rltn

[Peter Pedant]

yeah I reckoned that at 5% it would be around £120
BUT
along with HIV syphilis and rabies, equity release is something to keep away from - terribly bad idea
BUT
I surprised to see the FT a fortnight ago, saying it might be used to provide a deposit for say a child's first house and place on the property ladder SO LONG as it was repaid with say five years. [I didnt think that was good advice
oh the repayment would of course be you and not the kid
and THEN the next week it was full of cases where the parents were suing their dear kids for return of the loan ( and losing unless there was a signed document)

[barney4444]

Found the link and advice useful. thank you.
Was sort of thinking at least with doing it that way, although we would need to pay the interest every month the amount owing would only ever be £30.000, but it seems that the maximum time you could do it for is 5yrs so its almost just like a bank loan i guess.

[barney4444]

Except the repayments are £458 a month, but then of-course you dont still owe £30.000 at the end!!

[ubasses]

Yes, there is a maximum age that you can have Mortgage to, usually around 70/75 if you can prove affordability to pay after retirement. However you would have to made full repayment at that time and show now where the funds would come from.
The other options would mean that you would be accruing the interest until sale or death which can get to be high sum. Or you sign over % of your house, of which you will not be paid the full amount. This will also be repaid as above, but both parties benefit from any growth.
Mainstream Banks are not into this market, it is mainly insurance companies and specialist companies. A lot of careful thought is required.

[barney4444]

Your quite correct, seems tempting to do it, but it not a cheap way of raising funds, plus you keep thinking that it would be nice for the kids to have something left after we gone, not that that would be the case if care homes come into play but thats another whole can of worms!!
Cheers..

[djtdjt]

I pay £124 month, that is on a £39000 lifetime mortgage, I have the option to stop the repayments if I wish, but then the amount I owe will increase.

[gianty]

I believe the difference of a "standard interest only mortgage" and equity release (lifetime mortgage) regarding the repayments is that one requires payment (the standard interest only mortgage) whereas the other one doesn't (lifetime mortgage). You can choose to service the interest with a lifetime mortgage and if you do so, the amount you will owe will be the initial loan amount. If you don't the interest compounds and you end up owing back more, but this is the case with any loan.
This may be helpful? https://www.equityreleasescotland.org/faqs/what-is-equity-release-and-how-does-it-work/