Irene’s story

Steve and Angela live in Penn Street and are both in their mid to late 60s, retired with 2 grown-up daughters and 1 grandson. They have lived in their house for almost 40 years. They would like to help their youngest daughter with renovations to her house but feel they should treat their other daughter the same. Steve and Angela’s pensions give them enough income for their day to day needs and they can afford an annual holiday. They have very little savings, so they did a lifetime mortgage to release equity from their home. It did cross their minds to downsize to release the money, but they love their house and the village of Penn Street with their friends nearby and surrounding countryside. They also feel that they want adequate space in the house for when their grandchildren come to stay.

Steve and Angela’s house is worth £765,000. They decided to borrow £75,000: £30,000 for each of their daughters and £15,000 for a new car for Angela and a few other ‘treats’ for themselves. They had always loved the idea of building a garden room at the back of the house coming off the lounge so they have built in a ‘cash reserve’ facility into their lifetime mortgage for them to draw down at the point when the plans are complete and they are ready to go. They are not being charged interest on this extra £75,000 facility until the money lands in their bank account. Steve and Angela have decided not to pay the interest and so this will ‘roll-up’ in the background and will be added to the amount borrowed.

It was a pleasant surprise to Steve and Angela that the amount outstanding after 10 years wasn’t a frighteningly large amount: interest rates on Equity Release mortgages are at an all-time low (July 2018). The rate applying in this case is 3.53%. The lifetime mortgage becomes repayable only in the event of the second of Steve and Angela’s death or the second of them to go into long term care.