Equity Release Mortgages – Part 2

mortgage

Last week, I wrote a first instalment about an equity release mortgage (which can be read here: http://olderhood.com/2013/12/17/equity-release-mortgages/).

The formal mortgage offer arrived this week. The mortgage is a way of realising in cash some of the value invested in my apartment. I’ve been negotiating the details with my mortgage broker for a few weeks. Last week, a surveyor came by to look at the place and assess its value. He priced it at what I paid for it a few months ago, which was fine with me.

Until the formal offer arrived, all I had to go on was conversation and the thoughts of others. The offer document somehow made the whole thing real and underlined the seriousness of what I’m about to do.

The offer outlined in great detail every aspect of the loan, all of which had been discussed with my advisor. The first thing I looked at was the amount I’m about to borrow. It was, as expected, 24.5 percent of the value established by the surveyor. The next item I looked for was called “Other benefits and incentives”. Here it is, in full:

“This mortgage has a ‘no-negative equity’ guarantee. This means that:

* You can carry on living in the property even if the value of your home becomes less than the amount that you or your estate owe [on the mortgage].

* When the mortgage is repaid following the sale of your house, you or your estate will not have to pay back more than the value of your home.

* If the no-negative equity guarantee is used, the value of your home will be assessed by an independent valuer. There is no extra charge for this guarantee.”

I doubt I could carry on living in the apartment if my estate were to be involved, because I’d be dead. My death, which is no fun to contemplate, is the driver in this transaction. Because it seems likely that I will die at some point in the future, taking out a loan such as this equity release mortgage becomes easy to contemplate. They give me the money; all I have to do to fulfil my end of the bargain is to snuff it.

Two-fifths of what I’m borrowing has already been given to others, to improve their lives, and almost all the balance has gone, or will go, into buying and furnishing the apartment I now live in. I used my savings for all that, and was happy to do so. The mortgage refills my savings account and will keep me alive until I’m gone, or too far gone to care.

Death is something few of us wish to think about, but knowing it’s coming makes some decisions a lot easier.

My plan is to live to be 400 years old, at which point I’ll owe the mortgage company about 70 trillion Pounds and all they can have as repayment is whatever the apartment is worth when I’m gone. If that happens, it will have been a rotten deal for the lender, but he knows, as do I, that I’m not likely to make 400.

He expects me to make 84, the documents seem to say, and if that’s true, I’ll die happy. It would give me another 20 years, which I plan to fritter away writing articles for Olderhood, spending the mortgage money and generally misbehaving.

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