How does having a younger occupant, such as a son or daughter, living in your home affect taking out equity release? Mark Gregory helps a reader with this question in the this week’s Q&A
The Question
I’m in my 70s and live with my adult son. I own the house and I am completely mortgage free. If I were to take out equity release, what would happen to the repayment when I died?
I understand the equity release interest would need to be repaid, but I also know my son will want to remain the home and he would not be able to afford the repayment.
He is my only child, so there are no others involved. Please could you advise?
Mark’s Answer
When planning and considering equity release, we always encourage our customers when they feel comfortable, to consult with their families to ensure there are no surprises in the future when the plan is repaid, and this is especially important if you have family that still live with you as the capital released will impact on them in the future.
For example, if after assessing your circumstances one of our expert advisers recommended that you apply for a Flexible Lifetime Mortgage, it would be available for the rest of your life or until you enter long-term care.
Your home would normally be sold to repay the equity release plan, and any remaining equity would be available for your beneficiaries.
A lifetime mortgage (the most popular equity release scheme) has a fixed interest rate for life, hence you will know exactly how much you will owe each year, and the interest will compound until the loan is repaid.
With a flexible Lifetime mortgage all plans have the option to make flexible voluntary payments to allow you to pay the interest, and with some plans you can include an inheritance protection guarantee.
As part of the equity release conditions, your son would have to sign an occupancy waiver which means that he would agree to leave the property within 12 months if you pass-away or enter long-term care. During that 12-month period, the lender would still charge interest until the loan was repaid.
Depending on your son’s circumstances at that time, he could repay the loan from his own resources (e.g. savings/mortgage) and keep the property assuming it was bequeathed to him from you, and you have no other beneficiaries, or he could just sell the property to repay the loan.
One of our expert advisers will be happy to provide you with further information without obligation and they can be contacted on 0800 802 1051 or via our free LiveChat facility.
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
