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Equity Release?
Anybody had any experience of this or knows anything about it?
Background:
My father in law recently passed away and my daughter is due to inherit half of his estate, approx £150k, sometime next year.
She's currently renting and wants to buy her own place.
She's single with no kids.
She probably needs another £50k to get one.
Mortgage is out of the question due to poor credit rating.
I'm thinking of releasing some of the equity in my bungalow, curently worth around £300k.
I know equity release has it's downsides with the interest rates, etc.
Thoughts?
Background:
My father in law recently passed away and my daughter is due to inherit half of his estate, approx £150k, sometime next year.
She's currently renting and wants to buy her own place.
She's single with no kids.
She probably needs another £50k to get one.
Mortgage is out of the question due to poor credit rating.
I'm thinking of releasing some of the equity in my bungalow, curently worth around £300k.
I know equity release has it's downsides with the interest rates, etc.
Thoughts?
Comments
https://www.comparethemarket.com/mortgages/content/getting-a-mortgage-when-you-have-a-bad-credit-history/
Just some general thoughts. I'm no Financial Adviser.
Firstly, don't assume that just because your daughter has a bad credit rating she will be unable to get a Mortgage. 2 things to say there-firstly, LTV (Loan to Value) is important. Without wishing to sound too cynical, a lender's first thought is not "can they afford it" but "will I get my money back if they default on the Mortgage?"
If a house costs £200k and there is a £150k Mortgage, the various costs of selling a house/unpaid mortgage, reduction in value via forced sale, means a Lender is running a risk. Whereas at £50k, they are not.
The next thing to say is that a lender might want you to act as Guarantor. This has various advantages-and disadvantages-compared to Equity release. And you would be wise to take independent financial and/or legal advice in relation to that.
The final point I would mention is that Equity Release has various disadvantages for people with children. In return for the advance, many lenders will take your house on your Death. £50,000 now may well be important-but not necessarily better than £300,000 in the future. Also check any clauses-some lenders insist you do a lot of maintenance to your property.
The last thing I would mention is that it may be wise to take a little time before going any further. Your daughter has the opportunity to improve her credit rating by spending some months living within her means-something that is a lot easier to do with £150k in the Bank.
Hope that helps at least a little.
Hope 2024 is a better year for you and yours.
Phil
2024 could hardy be any worse.....
Losing my wife and father in law in the last 4 months
I would agree with the @Essexphil comments.
You definitely need some financial advice.
What seems clear is that someone is going to borrow £50k to buy the property.
Your daughter may be able to do this despite her credit history.
There are specialist lenders that do this, depending on how bad her credit history is.
You may be required to act as a guarantor.
Or alternatively you may be able to purchase the property jointly with her.
You could also look at the possibility of taking out a mortgage on your property.
Although this would require you to make repayments.
As far as I understand it, what may seem like an advantage of equity release is that you are not required to make any repayments, could be a disadvantage, when you weigh up the cost.
The cost of it may be horrendous, and will depend on how long you live.
My understanding is that they would give you £50k, and you would be liable for the interest until you died.
Therefore the total cost may be the full value of your bungalow.
Your daughter probably has an advantage over you, in that she may be able to take a mortgage out over a longer period than you are able to.
Her current rent will probably offset the repayments.
You would be foolish to make a decision on this without looking for financial advice.