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Equity release

We’re thinking that equity release might be something for us.
Anyone on here done it? Is it worth doing? How much can you get?

Comments

  • iainment said:
    We’re thinking that equity release might be something for us.
    Anyone on here done it? Is it worth doing? How much can you get?
    It's not for everyone & something you will need to think long & hard about. Best to speak to family beforehand (children etc) and be mindful that if you are under 75 the interest roll-up can make a big dent in any equity left if you die later than average.

    I am an IFA & fully authorised to arrange Equity Release mortgages. The amount you can take all depends on your age(s) at outset & is a % of the current property valuation. Current interest rates are around 4.5%, fixed for life. You can take a mix of lump sum & income or just lump sum. 

    You will probably get varied views on this - mostly negative ime. Its not all bad but depends on why you want the money. Feel free to DM me if you want further info. 

    That surprises me coming from you Golfie mate! ;-)
  • A very expensive way of getting money from the value of your property.
    The better option is to sell up and move to somewhere cheaper, unless you can't bear to move.
  • Another consideration that the equity release firms often fail to mention in anything other than the small print is that the acquisition of a fairly large amount of capital can have a highly detrimental impact on any benefits recipients might get from the State.  For example pension credit and local government council tax reductions.
  • I think if you don't want to leave the property to your children, or if you don't have children, it's a decent idea.
    The interest rolling up each year can lead to a modest loan growing to the value of the property after a long period.
    This means the house effectively goes to the equity release company when you die, which is fine if you have no one you wish to inherit from you.
  • Thanks all. Something to mull over.
  • iainment said:
    Thanks all. Something to mull over.
    No harm in speaking to a professional & getting the real facts & not some half truths from those not ITK. 

    FWIW.......getting a case through Compliance & the regulators is pretty tough and an ER specialist 😉 has to justify why it is in the best interest of the client, with the starting point that usually its not. 
  • Can’t you just remortgage for a higher sum when your existing product expires and release it that way? That costs nothing. Obviously doesn’t work if you are on a long product and/ or need the cash immediately.
  • Can’t you just remortgage for a higher sum when your existing product expires and release it that way? That costs nothing. Obviously doesn’t work if you are on a long product and/ or need the cash immediately.
    A bank will want to see you have adequate income to pay said mortgage and how you intend to pay it off, as most are well into retirement and want the cash to fund life it's usually a no go (but worth looking into of course)
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  • I did some work for an equity release company a few years ago. I remember at the time being quite shocked by how little cash was offered for what were fairly expensive properties.
  • iainment said:
    We’re thinking that equity release might be something for us.
    Anyone on here done it? Is it worth doing? How much can you get?
    It's not for everyone & something you will need to think long & hard about. Best to speak to family beforehand (children etc) and be mindful that if you are under 75 the interest roll-up can make a big dent in any equity left if you die later than average.

    I am an IFA & fully authorised to arrange Equity Release mortgages. The amount you can take all depends on your age(s) at outset & is a % of the current property valuation. Current interest rates are around 4.5%, fixed for life. You can take a mix of lump sum & income or just lump sum. 

    You will probably get varied views on this - mostly negative ime. Its not all bad but depends on why you want the money. Feel free to DM me if you want further info. 
    I worked for a few years in compliance in a major Equity Release lender. Everything @golfaddick  has said is spot on.

    The key things to think about are:
    1. Do you actually need the money, or do you want to know you can access it? Only borrow what you need now, you can draw down the rest later of set it up as a regular income top up. Lenders don't take that long to process a drawdown, so you typically don't need to bank loads 'Just in case'. You won't get the interest or investment returns to unwind the compound interest, so only borrow what you need. 
    2. Talk to your family, especially if you want to leave an inheritance. 
    3. Consider your age, if you're relatively young (certainly under 70) you'll be able to borrow less and you'll pay more interest over the course of the mortgage, remember interest will be charged, and compound, until you die or move in to long term care. The older you are, the more a lender will give you, as it's more certain they'll get their money back (as your life expectancy is lower the older you are).
    4. If you're not attached to the house or area then consider downsizing. This isn't the right option for everyone but it should be considered. 
    5. Think about the type of care you might need when you're older. Are you willing to rely on the state to provide you with a care home, or do you want to leave some equity to help improve the care you might get? You may never need it, but it also may be an important factor for you. 
    6. A good IFA (as opposed to a pure equity release adviser) should consider all of your circumstances and see whether you can achieve the finances you want / need in other ways as well (pension, benefits, investments etc.) - this is not a comment on @golfaddick who I do not know. If you choose not to go with an IFA and go with a specialist Equity Release adviser, some are tied to a certain lender. This can work in your favour with lower fees etc., but you also might not get the best deal. Shop around. A good IFA will help you do this. Overall the savings on the fees usually don't outweigh getting a favourable interest rate on the equity release, given that rate is fixed for life. 

    Finally I'd say to really consider what you want the money for. If it's a new car, travel (one day...), new kitchen etc., or you want to gift some to family now or pay of debts, it's important you consider your own circumstances and decide whether you can afford to fund differently, and whether it's worth the long term interest cost to you/your estate. Only you can make that decision, but again a good IFA will help you evaluate it. 

    Like Golfie, any questions feel free to DM.
  • Rob7Lee said:
    Can’t you just remortgage for a higher sum when your existing product expires and release it that way? That costs nothing. Obviously doesn’t work if you are on a long product and/ or need the cash immediately.
    A bank will want to see you have adequate income to pay said mortgage and how you intend to pay it off, as most are well into retirement and want the cash to fund life it's usually a no go (but worth looking into of course)
    Recently lenders have introduced Older life mortgages which are for people who have retired & the lending is based on retirement income. Max is usually 4.5x income & are interest only, so monthly repayments are low (£50k would be around £200pm) and the advantage is that there is no interest roll up. That might be an avenue to explore, especially if you have a decent pension & only want to release £30k -£50k. 
  • Brilliant post Beardface.
  • Equity release can also lead to difficulties if you do eventually wish to downsize for some reason.

    You are allowed stay in your house until you die but you may not have enough equity left to buy a smaller one. This becomes a real problem if the house is unsuitable for an older person.

    You can end up with no choice but to stay put or move into a care home. 
  • The compounding of interest is scary. If you borrow 100K at 5% you'd owe 163K in ten years' time.
  • A question from the flip side of equity release. Quite a few years ago a friend was considering offering up a share of his house for equity release. I had a few quid floating around so offered him the same deal he was being offered which he was more than happy to do. We went through all the legals and had my name put on the Land registry etc. I have since lost contact with my friend and feel uncomfortable knocking on the door to see if he is still alive. How can I find out if he is alive as I am worried that he might have passed away and one of his children is now living in the house now rent free. Is there a legal process that comes into play when a person dies that ensures the estate is sorted out.
  • A question from the flip side of equity release. Quite a few years ago a friend was considering offering up a share of his house for equity release. I had a few quid floating around so offered him the same deal he was being offered which he was more than happy to do. We went through all the legals and had my name put on the Land registry etc. I have since lost contact with my friend and feel uncomfortable knocking on the door to see if he is still alive. How can I find out if he is alive as I am worried that he might have passed away and one of his children is now living in the house now rent free. Is there a legal process that comes into play when a person dies that ensures the estate is sorted out.
    All depends on how it was structured when arranged, and definitely needs legal advice.

    But we had a similar thing in the family, with a charge put on the property for a substantial % of the property value, which became active upon the death of the occupant (arranged as part of a divorce).

    Based on our experience, it was a bit of a mess to sort though that was made complicated by the guy having done a runner, changed name, having no kids etc. - as it was registered as a charge / ownership interest, we had a duty as executioner of the estate to find the person in order to discharge it, which was achieved by doing things like advertising in the London gazette, checking electoral rolls etc. We couldn’t touch the cash from the property being sold as it was put into trust, and it would have gone to the state after a certain period through a court process if we were unable to find the person concerned. 

    If i was you, I’d get legal advice on options, knock to find out the current situation, or at the very least check public records for them (plus facebook etc)
  • Thanks for the advice. Much appreciated.
  • A question from the flip side of equity release. Quite a few years ago a friend was considering offering up a share of his house for equity release. I had a few quid floating around so offered him the same deal he was being offered which he was more than happy to do. We went through all the legals and had my name put on the Land registry etc. I have since lost contact with my friend and feel uncomfortable knocking on the door to see if he is still alive. How can I find out if he is alive as I am worried that he might have passed away and one of his children is now living in the house now rent free. Is there a legal process that comes into play when a person dies that ensures the estate is sorted out.
    Seems a totally bonkers thing to do imo. Can't have been a good friend seeing as you don't even know if he is even still alive fgs !!!

    FWIW  if your name is on the deeds at LR (ie, they are showing you having an interest or charge on the property) then the property can't be sold without your name being released, and therefore you will ultimately be alerted at some point.

    I would strongly suggest you go round there toot suite & check things out - as well as asking for your money back. 
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  • I see a new mis-selling scandal!
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