Equity release mortgage - reversionary type

[diotima]

Does anyone know anything more about the equity release schemes that were announced some time ago? In my particular circumstances - single, no kids, retiring to France next year - a reversionary mortgage for the allowable maximum could suit me. I have a detached 3-bedroomed bungalow to sell here, and obviously want to have as much income as possible. I haven't seen a mention of these since the original announcement, I'm hoping the schemes haven't been abandoned.

TIA for any information.

This forum is fantastic, BTW, I've never seen so much useful information in one place, and really appreciate the help.

[Lollie]

I used to sell mortgages many years ago when the first equity release mortgages came about.   But an equity release mortgage is just that, it releases an amount of equity from your , based on percentages of valuations so therefore if you are selling your house I dont think it is an equity release mortgage you are looking for, unless you have two properties?  Try talking to one of the larger reputable mortgage lenders for information.

Lollie

[diotima]

According to my current mortgage lender (who don't do this kind of mortgage), a reversionary equity release mortgage is one where the borrower doesn't make any repayments in the normal way, but the mortgage lender takes a stake in the equity of the property and has to be repaid either on the death of the borrower, or the borrower going into fulltime care, by the sale of the property unless the borrower can raise the money some other way. There are usually no restrictions on what the loan can be used for. Effectively, the lender is allowing the borrower to live in the property rent-free.

The maximum amount that can be borrowed has to take into account the interest that will accumulate so the maximum will be something less than the market value of the property. The amount the lender receives on repayment is the percentage of the gross sale proceeds equivalent to the percentage the borrower mortgaged at the start, not an amount calculated on interest rate and length remaining on the mortgage. The lender may get a handsome profit if house prices rise, but equally is taking a risk that if house prices stagnate or fall over a significant period, the return may be uneconomic.

This kind of mortgage interests me because of the potential for maximising my income, and especially because, (with the exception of my mother who was a lifelong smoker and died of lung cancer at 68) all my female blood relatives in the last two generations have lived past 100, and I intend to do the same! Unless I get mown down by white van man of which France seems to have a disproportionate number...

With having no kids to leave it to and not being able to take it with me when I go, I'm going to make every effort to enjoy it while I'm here :-)

[Lollie]

Yes, but it was originally brought into being for equity release on a property that you already own,  originally for people over 50 to release funds which were tied up in property.   A lot of lenders did pull out of the market as there were problems when it came that people died and their relatives were not happy with valuations either taken at the beginning or at the end time.      If my memory serves me right, and I am afraid I am only talking mid to late nineties, they were stopped for a while, but maybe something else has been put in place.

Having said all that, I have never come across this type of mortgage in France;

[diotima]

Hi again

This is the article I was referring to -

http://www.home.co.uk/guides/news/tmc.htm?9542.

It's the Prêt Viager Hypothécaire I'm interested in. Perhaps developments are in progress and we'll know more when the schemes are firmed up. Or not (fingers crossed here).

[KathyC]

This could be an interesting development but I wonder what would be the advantage over selling your property "en viager". I had assumed that the existence of this mechanism was the reason why French the didn't have equity release mortgages.

[diotima]

Is 'en viager' mortgaging a house to provide an annuity income? I'm working hard on my minimal French. That would be another option, I hadn't thought of that - thanks for the info, I appreciate it.

The move is a year away; I'm going to need a good financial adviser when I have a better idea of how much cash I'll have. Right now I only know where I want to live and the lifestyle I want :-)

[KathyC]

If you sell your property "en viager" you will receive a lump sum and then regular payments until you die. The amounts involved will depend not only on the value of the property but on your age.  It's a gamble for the buyer; if you live for years they have to keep paying, but if you go under a bus the following year they'll be quids in! The property goes straight to the buyer when you die.

I believe you can market your property through most immobiliers, although there are those who specialise in this type of sale. If you Google "vente viager" for the UK pages you will find several sites that will explain the process more fully in English. It's what I plan to do myself, after paying off the mortgage.

Good luck.

[diotima]

Thank you!