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Equity Release Frustration – (Case Study: Equity Release Idea to Solve a Serious Cash Flow Problem)

Life is never dull at the HQ! Last week Mr&Mrs J submitted an enquiry requesting a cash offer for their property after already trying several other “equity release/equity loans” and “cash buyers” type companies. This is a complicated tale, so I shall start right from the beginning! Mr&Mrs J some year ago where granted planning permission in their back garden (a half acre back garden!) for a bungalow. The idea was Mr J would build new bungalow whilst at work and in his spare time as a long term project – an ultimate a home for their retirement.

Good plan I suppose, despite taking longer than expected, Mr J – decided to take early retirement to speed up the final stages of the self build project. At this point, not only had they over shot their time frame, but their budget too, so things began to slow again. They decides to re-mortgage their old house to release the equity within it to get the bungalow finished. This was not as easy at the hoped, with countless applications it seemed the main hurdle with the re-mortgage was the fact they had no actual earnings. Not matter how many times they explained that as soon as the bungalow was complete the house would be sold and the mortgage clearer – well it landed on deaf ears. Or in Mrs J own words “it was like a real life computer-says-no” situation.

To put this in to context, the house valued at £290k, they owed 35k left on their mortgage and wanted to release 50k via equity loan (this would still leave 205k equity in their old house) No wonder their where frustrations around the whole equity release idea. Obviously they couldn’t sell their house until the bungalow was completed. are always willing to thing outside the box (as they say) so after a few good chats, and a few emails back and forth – we had a plan (a jolly good plan… read on…)

We asked them, what the maximum amount of time they think it would take to complete the bungalow providing having the cash was not an issue – meaning liveable (not perfectly decorated!) Mr&Mrs J agreed 4 months tops. We then put it to them that what if we arranged a cash sale for the property with a separate contract which leased the property to them for 12 months (to be on the safe side). They mulled it over for a few days, and Mrs J drove a hard bargain over the rent – and by the end of the week we where all in agreement that would buy their house from them for cash, then rent it to them for 12 months (the rent would be deducted from the sale fee so they had nothing to pay) and as a good will gesture from Mrs J (having already had our hats well and truly nailed on), should they vacate the property before 12 months she will hand the keys over and cancel the lease so we can renovate and sell it on.

That was about 2 months ago now, so hopefully the bungalow is well on its way – I have made a note on their file to update this post when they move in – any wagers on how long? My guess is 9 months!!

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