Releasing Equity for Home Improvements

Posted on 20 January 2011 by Pauline Doughty


My 83 year old mother owns a house worth approx £350000. She would like to borrow at least £30000 for home improvements. What would be the best option for her?

Pauline,

The answer to this will very much depend on your Mother's income and whether or not she can afford to and/or wants to make regular monthly repayments.

The vast majority of High Street banks and Building Societies impose a maximum age at the end of the mortgage term, usually 75. I only know of one Lender who does not have a maximum age restriction and who may consider an application from your Mother. It would be subject to their normal underwriting criteria and in particular being happy that your Mother has the means to support regular mortgage payments both now and in the future. Their mortgage rates are competitive and this would probably be the cheapest way to borrow the money.

Alternatively, your Mother could consider a Lifetime Mortgage whereby the interest is not paid back monthly but rolled up and only repaid upon the sale of the property. There is no set term and therefore the total cost will not be known at the outset. These mortgages are carefully regulated and your Mother would need to seek independent legal advice and speak to a specialist independent mortgage broker who is authorised to advise on Lifetime mortgages. You need to watch the set up costs of these as well as the interest payable, especially on a relatively small loan.

Depending on your relationship and own personal circumstances it may also be worth seeing if you could raise these funds for your Mother. As the debt and any risk or liability would be yours I would recommend getting independent legal advice on how best to protect yourself if you decide to pursue this option.

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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