Equity release mortgage for someone who wants to continue living at home

[Katrine]

Somehow I had got into my head that Attorneys/Deputies/Guardians were not allowed to take out an equity release mortgage on the adult's home. A recent family discussion has challenged this idea. TBH I don't remember where I got the information. Can anyone guide me to the relevant part of the interweb please?

OH and I are Guardians in Scotland for my mum. This is similar to deputyship. She is the sole owner of her property. The costs of live-in care may use up all her capital in the next couple of years, if she lives that long. The obvious thing to do would be to arrange a draw-down equity release mortgage with an initial lump sum loaned and then access to regular additional loan payments. I know that there are products like this around.

Has anyone done this as an Attorney/Deputy/Guardian for property and financial affairs?

 

[Pickles53]

I haven't done this but have a relative who is now trying to sell her house and move somewhere smaller mainly to get out of an equity release scheme which has become, as she puts it, 'a noose around her neck'.

I'm sure you've done your sums, but the costs of these schemes are appalling. If your mum ever has to leave her home and you want to end the arrangement effectively you have to compensate the company for the money they expected to make if the loan had run for the number of years anticipated. It does depend on the age your mum is now, but in my mind the advantage of getting capital upfront is not enough to compensate for the ultimate cost.

 

[marionq]

Pickles53 you are quite right. Equity release is the worst possible option in almost every case. Do your research Katrine and you will find it is better to sell outright and buy a smaller property or invest the capital.

 

[Katrine]

Thank you both for your comments. I am not a fan of equity release, having seen what MIL had to pay for having borrowed quite a modest initial sum. I similarly called her mortgage "a millstone round her neck".

To give the situation context: my mum is 90 and has had vascular dementia for 8 years. We have made extensive disability adaptations to her property, plus bedrooms and bathroom for live-in carers. All this is to enable her to stay in her own home for the rest of her days. We don't know if she has weeks, months or years to live. She has exceeded all medical predictions about her life expectancy.

We need to release equity in her house if she lives beyond another 18 months. This is when her capital will run out. She has income, but it is supplemented from her savings.

I think her age and medical condition may in itself be a red flag to mortgage lenders because they are unlikely to get as much profit from the equity release loan as they would like.

Anyhow, I would be really interested to know if anyone has achieved equity release on property on behalf of an adult for whom they have POA or similar?

 

[marionq]

Using her house as collateral would the bank give you a loan on an interest only base with the capital being paid back when she dies and the house is sold? This should not be as punitive as equity release.

 

[Katrine]

Thanks Marion, that's certainly worth considering. What we need is an ongoing draw down facility so that we can feed funds into her spending accounts as needed. We don't want to ask for a big lump sum because it may not all be needed. We will talk to the bank.

I am not surprised that no-one has responded with regard to direct experience of obtaining equity release. Most people would plan to move the adult to a NH/CH in our situation. The family really don't want to do this because she is very happy in her own home and would not enjoy living in a communal environment. Yes it is a luxury to live in what is in effect a private CH for one person. However, I know it is how my father would have wanted us to spend his money.

With regard to finance, our authority as Guardians ceases when my mother dies. Thereafter debts are the responsibility of the executors. Any type of loan would therefore need to be secured against the property so that the lender had first call on funds payable from her estate.

 

[Pickles53]

I think it's the requirement for a drawdown facility rather than a lump sum which may explain why you haven't had many responses. Admittedly I haven't done the research recently, but everything I have seen is based on releasing a single lump sum of capital even if you don't spend it all at once. I can't see how a company could calculate what would be due if they didn't know how much capital in total would be released from the outset.

It may be a bit offbeat but would an overdraft option be possible? Or using a credit card? No idea if banks or finance companies would allow this, just trying to think of other options.

If it has to be a lump sum maybe the best that can be done is to put it in a savings account, though I know the interest paid would be less than the loan interest.

Have you tried speaking to a specialist IFA? I've recommended finding one via the website below on other threads. Ours was very helpful indeed. (I'm not anything to do with this organisation by the way!)

http://www.payingforcare.org

 

[Katrine]

Update

I thought I would update this thread now that we have taken action.

We approached a national broker specialising in equity release mortgages. They act as independent financial advisers and have access to a number of plans from financial providers that are not sold direct to the general public.

We explained our requirements and the broker recommended the plan that best suited our needs, with the highest maximum drawdown facility. They then sent us a written recommendation report which we forwarded to OPG for approval. It was approved with no difficulty. We will need to advise OPG when and if we want to draw down a further sum on the mortgage.

The product we purchased is called a Lifetime Drawdown Mortgage. The initial sum borrowed is £10K. We can draw down further funds from 12 months after the start of the plan. The maximum total drawdown is about half the value of her house. The set-up cost is just under £2K, including survey and legal fees, and the broker's commission on the sale. We will pay interest on the £10K at a fixed rate. Any further draw down will attract fixed rate interest at the going rate at the time of application.

The broker advised that as my mum is 91, she might not be approved for an equity release mortgage if we waited another 2 years (which is when she is likely to need the extra funding to pay for her care costs). If she does not survive that long then the outlay on the initial small mortgage will have been modest.

The facility to draw down further sums now gives us peace of mind that we can continue to provide my mum with live-in care at home for the rest of her life. If she should need to go into a nursing home then the amount outstanding on the mortgage will be repaid from the proceeds of the sale of her property.

 

[garnuft]

Sounds like an expensive way to borrow.


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[Katrine]

Sounds like an expensive way to borrow.
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Yes, it is expensive to set it up. The interest rate is higher than for a standard mortgage I think - 5.4%. Interest on later drawdowns might be at a higher fixed rate, or they might be at a similar rate; it just depends on what the financial markets are doing at the time.

Put it into context. My mum is 91 and is already in Stage 7. She has had full-time live-in care for 8 years which has cost most of my parents' life savings to sustain. We hope to continue with home care, but she might eventually need specialist nursing, in which case her house will be sold. If she does remain at home, equity release will supplement her pensions and other income for her likely remaining lifespan.

None of her children are aiming to protect an inheritance in preference to giving her the best care we can provide. Some of us need the money, but none of it is ours until she doesn't need it any more. In addition, she chose to bequeath half her residual estate to charity, so we won't get much anyway. Isn't it better to use her estate for her benefit now rather than to put her in a NH in order to save money, only to give it away later?

I am not recommending equity release as a cost-effective solution. I just wanted to provide an update to those people who took the trouble to respond to my original post. I thought it might be interesting to know that we were able to find the right solution for our family.

 

[garnuft]

Indeed it is, Katrine.
Worth every penny just tried to quickly point out it was fiscally expensive.
Emotionally? Worth every ha'pence. x


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[Katrine]

Indeed it is, Katrine.
Worth every penny just tried to quickly point out it was fiscally expensive.
Emotionally? Worth every ha'pence. x
Sent from my iPhone using Talking Point

Thanks Gwen.

 

[Shannie]

Somehow I had got into my head that Attorneys/Deputies/Guardians were not allowed to take out an equity release mortgage on the adult's home. A recent family discussion has challenged this idea. TBH I don't remember where I got the information. Can anyone guide me to the relevant part of the interweb please?

OH and I are Guardians in Scotland for my mum. This is similar to deputyship. She is the sole owner of her property. The costs of live-in care may use up all her capital in the next couple of years, if she lives that long. The obvious thing to do would be to arrange a draw-down equity release mortgage with an initial lump sum loaned and then access to regular additional loan payments. I know that there are products like this around.

Has anyone done this as an Attorney/Deputy/Guardian for property and financial affairs?

Hi Katrine - I noticed a post of your's sometime ago regarding Equity Release for your mother and was wondering if you were able to get this as you stated your mother's house was not of standard build'. If you succeeded could you please give me the name of the company you got the equity release through as I am myself looking into this and as my house is also not of standard build' was interested in finding out a company that could do,this for me. Thank you

 

[Katrine]

Hi Shannie. Have a look at this thread too
https://forum.alzheimers.org.uk/threads/equity-release-non-standard-construction.89149/#post-1447860

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