.. to ask for your thoughts about equity release?

My parents did this while in their 70s to release money which allowed them a big holiday and new car. They had a lifetime mortgage product. Before they did it we had a family meeting to discuss it and my sibling and I were happy for them to go ahead and enjoy retirement.
We knew the value of their property had increased significantly in the 30 years they’d lived in it having already downsized.
The loan amount taken was roughly 20K and after they both passed away in their mid 80s still remaining at home so no care fees the debt owed until the day the property was sold was approx 42k.
I shall always be happy of the enjoyment they got from their big holiday.
However I realise in some cases the debt mounts to crazy high amounts over years.
If someone has no children or close family to pass on an inheritance I see no reason to not enjoy their money

But once the person dies they don't have to pay the loan back no matter what. All the company can take it the house ( of which they no longer have a need of)

But in the case of the original OP, this really doesn’t matter. The person will be dead when the debt becomes due - and they’ll have had funds to use for whatever they need whilst alive, without worrying about the cost, stress and expense of moving.

For single people, with no dependents, equity release is definitely an option. Personally, I think most of the concern around equity release comes from children who are worried about not getting an inheritance.

My mum did ER. We knew she was going to do it. We told her to go ahead. She’d had a really tough life, she’d done everything to make things the best for us on very little. We were VERY happy that she’d been able to enjoy some much deserved happiness with the funds she released. Yes, our inheritance was very much reduced. No, we didn’t care. Devastated at losing her, but happy that her last decade had been more comfortable than the previous few.

I guess a better way of looking at it is lifetime mortgage .. equity release brings out tons of out of date misinformation. And the advice to downsize instead ... where do these people live? I could move to a house that cost £100,000 less than the one i live in, but all the upheaval and potential costs with the new house I'd rather not.

Equity release can be an interest only mortgage. And you can pay the interest to keep the debt the same, which may not be difficult as the minimum state pension is around £1,000 per month now and most are on far more. or let the debt grow, there are no negative equity guarantees..

Or of course, oldies can live in poverty and discomfort to ensure the maximum is left to the care home or the relatives (I'm in the situation of making this decision now too)

Equity release doesn't give you the whole value of a property either. Unless you are really quite old most reputable providers are probably going to give you maybe 30% of the property value. It's a loan you arent going to repay, with the remaining equity in the property absorbing the accruing interest.

I said "if any". But for example for most people it means it has to be sold, so son/daughter cannot move into it without taking out their own mortgage to refinance the debt. They also want their money within 12 months which can put pressure on to sell in a slow market (instead of hanging onto the property for a bit longer). It's just an added consideration.

We are weighing this up. Approaching 70. Smallish mortgage to pay off, moving costs and so on. Hardly worth bothering.

NO! tell her not to do this. She will be trapped in that property. The loan is repayable when the property is sold or she dies. If she becomes disabled, she will no longer be able to downsize to more suitable accommodation or afford a decent care home.

My PIL did this in their early 60s. MIL refused to leave her large home she had brought her family up in. They had plenty of equity and could have bought something nice with funds leftover to spend.

Fast forward nearly 30 years later. MIL who is now aged 90 and disabled is living in one room. The house is literally falling apart. FIL spent his last years in a care home (paid for by DH and his siblings) partly because the house was unsuitable. Her beloved house will eventually be sold at auction and likely demolished and redeveloped as it’s in a prime location.

What problems are their for anyone who inherits?

They sell the house in the usual way and the loan is settled, same as a mortgage would be.

It is rarely a good idea, but if an 80 year old, who isn't married or has any children requires extra money to live out their final years in the comfort they deserve, then why not? This is probably the type of person who should be taking it out!

A no from me too. If she has to be in hospital or care home for a year her home can be sold by the equity release company. I'll be downsizing.

With all the expense and upheaval involved? Equity release would make more sense.

If she has no dependants, it's a good idea. It just means her estate will be worth less when she dies. I have a friend who's a qualified financial advisor who plans to do this and she's only 65.

@LeftieRightsHoarder Do you know what she wants the money for? Is it for a one off thing or is it to supplement her other income to help with cost of living?
Understanding her objectives is the starting point to then seeing whether or not equity release is the most suitable way forward.

If you haven’t got family to leave money to then I think it’s a good idea. You will have a home to always live in until you die. I think there have been improvements in equity release over the years.

This. The problems if any are normally left to the inheritors of a property and cause little issue to the person who releases the equity as you can opt for no monthly payments.

Why?

If this situation arises, the LA take the amount owed to the ER company into account when completing their financial assessment. A charge wouldn’t need to be put on the house because it would be sold to fund care costs. At the same time, the ER loan would be repaid.

An absolute no from me, downsizing is better.

Absolutely no issues with selling my DMs house when she died. The ER company is no different to a mortgage company - you sell the house, the conveyancing solicitor pays off the ER company and the rest is paid to the Executors to be given out to any beneficiaries.

My understanding is that the worst thing that can happen is interest payments . mean the whole value of the house eventually belongs to the equity release company after a number of years. OK if you die in that home and don't mind leaving less in your estate. Not good if you need to move somewhere else.

Not correct.
My mum took out ER of £16K and when she died 8 years later the amount owing was £42K.

Why do they say this? What do you mean ‘most certainly won’t be able to help them’? Help them do what?

This has raised a question for me - if you do equity release at 80, and then need care, you’ve effectively reduced the value of your main asset at sale. Does that complicate things when social care are requiring house to be sold to fund care? Do equity release firms ‘allow’ a charge to be put on the house they have an interest in?

Rough rule of thumb is that the amount you borrow doubles every 10 years. So £10k becomes £20k after 10 years, £40k after 20 years etc.

@LeftieRightsHoarder at her age, I wouldn’t say it’s a bad idea (the older you are, the better - ER too young isn’t the best use of freeing up cash). I’d definitely encourage her to seek independent advice, especially around costs of any care needs as she gets older.

I think those who are single and without children are probably in the best position to consider ER, as you’re not worried about ensuring your estate is left for family. But it’s still best to explore what costs may arise as you get even older.

Downsizing isn’t always as easy an option as seems to be thrown around on here. Bungalows (in my area) are ridiculously expensive. Then factor in stamp duty, legal fees, moving fees, bloody stress etc. it’s not an easy solution a lot of the time.