The Question
I have heard equity release customers make the repayments when they die or go into care. My parents took out equity release four years ago but since then, sadly, my Dad has passed away. My Mum would like to downsize but is not (thankfully) ready for the care home just yet.
Will we, therefore, need to pay off the equity release loan or can we transfer it to the new property? To help you a bit, the current house is worth £490k and my parents released £215k as equity release. My Mum is looking at flats in the £300k region.
Neither my Mum nor I are very financially savvy so apologies if this is a stupid question or the answer is really obvious. We are struggling to understand it all. Thank you.
Mark’s Answer
Firstly, I am sorry to learn that Dad passed away, and secondly there is no need to apologise as you are not asking a stupid question.
Assuming the equity release plan your Mum has is a Lifetime mortgage, it has several flexible features that maybe relevant to your Mum’s future plans. I would strongly recommend that you have a review of your existing plan with one of our expert advisers, so they can help you and check the features your Mum’s plan has.
For example, if your Mum moves home and she wants to transfer a lifetime mortgage to the new property, she can do so if the new property meets the provider’s lending conditions. Your Mum will have to pay a valuation fee, arrangement fee and legal expenses in respect of the new property.
If the new property is of a lower value, the lender may ask your Mum to repay part of the amount outstanding on the lifetime mortgage, which would come from the equity raised by downsizing anyway.
If the new property does not meet the lender’s terms and conditions the mortgage would have to be repaid and your Mum might have to pay early repayment charges. However, some plans also include downsizing protection which means there are no early repayment charges to pay if the new property does not meet providers terms and conditions, so this may be an option for your Mum.
Furthermore, another valuable feature that your parents may have secured is the option to repay the existing Lifetime mortgage on first death without penalty and this feature extends for three-years following the first death of an applicant, so depending on when your Dad passed away this may still be an option for your Mum to consider using.
As you will see there are many features to consider, and our experts will help and guide you. They will not charge for their knowledge and all providers are very experienced with customers moving home and wishing to port, or repay their mortgages, so rest assured all options will be considered for your Mum.
Meet our expert…
Mark Gregory, founder and CEO of Equity Release Supermarket, is here to answer your questions. Mark is an adviser himself with over 20 years equity release experience.
He launched Equity Release Supermarket 10 years ago and it has grown to become one of the UK’s leading equity release specialists.
Email kate.saines@emap.com to ask Mark a question
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