Irene’s story

Irene, 81, is enormously proud of her granddaughter, Chloe. She has watched her grow up and qualify as an engineer and get a great job, working in London. At age 27, Chloe is still living with her parents, Tom and Jacky, commuting and saving hard for a deposit for her own place, preferably in London.

Tom and Jacky, both 53, like many of their generation, still have a mortgage, so while they help Chloe out to some extent financially, they don’t have access to lump sums to assist her with raising money for her deposit.

Irene wants to help out:

Her house is worth £440,000 and at age 81 she can release more than 45% of the equity. Chloe only needs £60,000 towards a 25% deposit. Having a deposit of at least 25% reduces the interest rate on her mortgage by almost 2%, so Chloe’s mortgage payments reduce from £1,250 to £800.

In addition to her state pension, Irene receives a pension from her job as an education adviser, so it would probably be possible for her to pay the interest on the equity release loan. The decision is made within the family not to pay any of the interest, but let it roll up, because the interest rate is low at 3.89%, fixed for life.

The option is there to pay off up to 10% of the loan each year, which between them, Chloe and her parents intend to do. Chloe now has a much lower monthly mortgage payment than she expected because of her large deposit, and now her commuting costs have been reduced to a fraction of what she was previously paying to travel into London every day.

Irene is delighted that she is able to see Chloe enjoy her inheritance at a time when she most needs it. Irene was advised to build in a no-cost Inheritance Guarantee, so she is happy that at least 50% of the value of her house is guaranteed to be passed on to her family, however long she lives, regardless of what happens to property values in the future.