Some homeowners are choosing to use loans to provide financial support for their children instead of themselves, as they struggle with unaffordable mortgage payments.
In one case, a 78-year-old mother used a lifetime mortgage to release £60,000 from her three-bedroom home in Essex in order to assist her two sons. One of her sons was no longer able to afford his monthly mortgage payments, which amounted to £2,000.
Prior to releasing any equity, the value of her ex-council property, on which she paid off the mortgage back in the 1980s, was £425,000.
She said, “If we have money sitting idle, why not help them? One of my sons would have lost his house if I hadn’t intervened. Hopefully, there will still be some value left in the house when I pass away. People tried to dissuade me. A friend of mine said that when her 87-year-old mother-in-law passes away, there will be around £20,000 equity in the house to be divided among her three children.”
Despite the potential risks, she has encouraged her friends to consider this option as well and is willing to release more equity if her sons require it. “With everything becoming more expensive, I think this is just the reality of the world,” she added.
Financial adviser Jan Johnson of 55Plus stated that after more than a decade of interest rates at 0.75% or below, recent rate increases have had a significant impact on homeowners whose fixed-rate agreements are ending, as well as those on tracker mortgages, resulting in “severe financial setbacks.”
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