Capital Raising in Retirement

Posted on 12 September 2011 by al


I have a £15,000 personal loan which because of reduced income I am unable to afford the current repayments. Is it possible to borrow the £15,000 as a secured loan on our property and only pay interest? My wife and I are both 64 and would want to repay the capital out of the estate of the last survivor. Our house is worth a minimum of £100,000.

Al

Halifax used to do this and as their Retirement Home Scheme was only available through their own branch network I am not sure if it is still available?  The difference between this mortgage and the more common lifetime equity release mortgage is that you pay interest every month and will need to demonstrate your ability to afford payments throughout the mortgage term.  With an Equity release mortgage the interest is not repaid until the property is sold or you move into long term care.  In this instance the detrimental affect on your estate would be even greater. As these are specialist mortgages you would need to take independent legal advice before entering into any agreement and also discuss your plans with any children or other beneficiaries of your estate as the secured loan will diminish the value of your future estate.

One other consideration for you is that the overall cost of borrowing, whilst cheaper in the short term, will eventually be greater because you will be paying the balance off over a longer term.  You may want to consider asking if you can borrow the money off a member of your family instead?

Peter

Answers provided in response to Ask the experts are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.

We recommend you seek professional advice with regard to any of these topics where appropriate.

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