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Alternative to Equity Release / Lifetime Mortgage?

I recently investigated "Equity Release" schemes with a view to realizing equity from a mortgage-free property. Frankly I was shocked to find the percentage of market value the likes of Norwich Union and others are prepared to offer..

Obviously there's no such thing as a free lunch and I'd expected to "lose" say 20-25% of the market value in return for a cash lump sum yet still being able to remain in the property. However it appears that, depending on certain variables, the "going rate" Equity Release providers offer is around 35% of the market value of one's home!

What I need is a plan to release around 130k from a mortgage-free property valued at 220k.

I've read about "sell & rent back" plans which seem to offer a greater percentage of the market value (75-90% is claimed) albeit that rent would then be payable on the property. The concern here is that none of the providers I've seen seem to offer concrete guarantees that you will be allowed to remain in the property indefinitely.

Does anyone have any suggestions?

Thanks in advance,

Stephen

Reply to
Stephen Horman
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In message , Stephen Horman writes

How old are you (and your partner if you have one)?

Reply to
john boyle

Surely if they offer you an "assured tenancy" then you could only be evicted if you were to fail to pay rent or breach some other important term of your lease.

Reply to
Adrian Boliston

John,

This is actually on behalf of my mother who owns the property, she's 75.

With regard to Adrian's comment about the assured tenancy, my concern is that this seems to be a rolling 12-month arrangement.

Whilst that's fine as you say if rent payments are regular which they would be, but what at the end of the 12 month period? Surely the company that now owns the property could theoretically decide to sell and not renew the tenancy agreement? If it were a 5 or 10 year tenancy agreement that would be different/

I'm beginning to think a "lifetime mortgage" is the only (repayment-free) way to extract a lump sum from the property and guarantee that one can remain in it. That having been said, it seems a shame that these schemes only offer a maximum of 50% of the property's value, unless I've read them incorrectly?

Thanks to both of you for the response.

Stephen

Reply to
Stephen Horman

Are you sure you are not confusing an "assured tenancy" (AT) with an "assured shorthold tenancy". The latter get "renewed" , but the AT would have an annual "review" rather than "renewal", which is normally linked with the RPI index in some way.

If the property was sold she would still have the right to occupy under an AT.

Reply to
Adrian Boliston

If you do the calculation on a spreadsheet or wherever and see how many years it takes to double a loan at an interest rate of say 6% where the interest is not being paid, merely rolling up, you'll find it's only about

12 years. Your mother could easily live to age 87 ( I presume) by which time she would owe the whole of the current value of the house if she took a 50% loan. If house prices go up, fine, but they may not, so the lender likes to have a bit of slack in the system. It's worth considering what criteria you would place if you were the one lending the money.

Rob Graham

Reply to
Rob graham

In message , Stephen Horman writes

In that case a typical amount released will be about 35%.

I agree, with the added rider that it is reasonable as well. I dont like reversion schemes at all.

No, but I dondt think you understand why there is the limit. The unpaid interest compounds and escalates the debt. If they lender gave a bigger loan then it would outstrip the value of the property. Dont forget that the lifetime mortgage guarantees that there will be NO negative equity. To advance too much too young gives this a problem.

I am surprised that she wants so much money, what does she want £130k for?

Reply to
john boyle

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