Releasing cash from your home without equity release?

A reader's mother wants to raise some cash to refurbish her home – but she does not want to go down the equity release route.

Tony Davis, myfinances.co.uk mortgage expert from Mortgage Meadow, takes her through the problem.

Sue from Northiam asks:

My mother, who is 84, needs to raise some money for refurbishment to her house.

There is no mortgage on the house, she owns it outright but doesn't want to go down the road of equity release.

Is there a way that I can apply for a loan for her using her house as security.

Tony replies:

It is highly unlikely that you will be able to raise a loan in your name secured against your mother's home, even if the purpose of the loan is to benefit your mother.

Equity Release schemes should not be discounted; look for lenders that are members of SHIP (Safe Home Income Plans), which is a self-regulatory body providing its own Code of Practice in addition to the rules and guidelines of the Financial Services Authority.

Equity Release schemes are often mis-understood and wrongly the source of great suspicion; they can be a very effective way of raising funds and can be an efficient part of Inheritance Tax Planning.

I would recommend that you and your mother speak with a mortgage advisor qualified and licensed to give advice in the specialist area of Equity Release.

You have two other options, firstly, it might be possible for your mother to take the loan out in her name with you acting as guarantor (which means that you guarantee the payments due), my concern with this option is the availability of lenders that would consider this because of her age.

Your other option is for you to go on the deeds of the property (what is referred to as a Transfer of Equity), as an owner you then have the ability to offer the house as security for a loan, which your mother would also have to enter into.

Whichever route you take I would urge that you speak with a financial advisor regarding inheritance tax and estate planning before you enter into an agreement.

If you have a question for Tony, go to the myfinances.co.uk Ask the Mortgage Expert section.

Or for more information or mortgage advice go to Mortgage Meadow.

Mortgage Meadow is an independent mortgage broker and is authorised and regulated by the Financial Services Authority.