Has anyone used equity release for retirement?

[Lilyflame]

I’ve only heard horror stories from the old days where people ended up owing more than the house was worth
ive spoken to one company and it sounds like its doable. I just don’t want to get ripped off

I understand they won't get the inheritance they might have expected but why would it cost them money and "bankrupt" them?

https://www.moneysavingexpert.com/mortgages/equity-release/

My mum used equity release. There were no issues, she got to stay in her home in comfort and when she died we paid it off from the proceeds of her house.

How does it bankrupt the kids?

We downsized from a 4 bed to a 2 bed with a smaller garden. The equity from the sale was used in part to renovate the new property throughout. We now live in a well maintained property with new everything, low utility costs, low maintenance all round. I would never want to go back to my old house (which I lived for the 28 years we lived there).

It doesn’t - they’re talking nonsense.

Why?

Yes, I can see moving to somewhere smaller but equally nice has it's benefits, but after stamp duty, moving costs and renovations you can't have released much equity, unless you're in a very expensive area.

My parents did it to mitigate inheritance tax. Not sure exactly how it works but know a trust was also involved.

Its only a scam if you dont understand how it works.

If you dont pay any interest and you borrow money, how do you think its likely to be paid back? Magic money fairies?

. In fact for an example, let’s say A owns a house worth about £135k and has a small 2 bedroom flat that she rents out.

How many times do people have 2 properties though?

Our new house was worth half the value of our old house so we ended up mortgage free with enough cash to renovate. The areas were quite similar.

It affects means tested benefits.

Why would a 2 bed bungalow cost less than your large detached house if it’s in the same area?

Who told them it was such a good idea? If you have a house worth £1m and raise ER to the tune of £200k on it, you’ve still got £1m in assets!

Exactly. I've looked, not particularly to release equity but to downsize, and after expenses I'd need to put in extra, I wouldn't be releasing anything.

I agree but theres two things to remember

1. The extortionate interest rates.. your parents hard earned money going to the bank
2. The kids and /or executors still have to comply with the terms of the agreement.

I had to visit the empty property weekly, we had to maintain and insure it till it was sold etc. We didnt care about the money but having to do that whilst you are grieving is awful.

I am actually living it. The house has been empty and on the market for nearly 12 months, the length of the loan after death. I am now liable for the whole debt, will be taken to court to enforce collection. Can't get a second mortgage/loan to cover the debt so facing bankruptcy. It's not nonsense, it's painful and messy.

Why wasn't it handed to the bank to sell and why has the debt transferred to you? Debt dies with the individual.

This really really depends on what kind of a product you go for and the amount of equity you have and more importantly ‘age’ - I know a relative who did this late 70s - but they did the kind where it’s more of ‘a facility’ - so like a giant overdraft and you are only paying interest on what you actually draw down - they did this for a facility of up to £120k drawn( around a quarter of value at that point ) - have drawn down around £50 k 7 years on , so now they are mid 80s and at the moment would owe £73k - it’s meant they could keep the house in good repair, have breaks, keep the car, not worry about bills etc - some years they have drawn down around£12k , others £6k depending on what they have on - they can get by ok on state pension plus a mid level private pension ( around £800 a month ) but this safety net made a difference to life’s unforeseen and extras - obviously if you have plenty of money in savings/isas then it might not be needed but if you haven’t then yes it can work - what I think doesn’t work as well is where people take £100k all in one go and then spend it or give it away and they are in their 60s etc

I used to work in equity release and 80% of our customers used it to pay off an existing mortgage. Second reason was to pay for their kids deposit on their own property, so in effect giving inheritance early. Very few actually took it for other reasons.

It's not a bank, it's a finance company and this debt doesn't die with the individual. I can't just give them the house, they won't accept it as they want money. I've spoken to an IFA and am hoping for the best but unfortunately I am facing court action.

They are not overdrafts. They are loans against the value of the property. They have huge implications when the debt is due. Often the people named in the will get little. If no dc then it doesn’t matter but it’s an expensive option if it’s about giving inheritance early! It costs a vast amount! I know two people who have done it. Neither had dc. In both instances the debt was huge.

The finance company need to deal with the executors and claim any money owed from the estate. You personally are not responsible for anything. The finance company have the choice of either waiting for the property to sell, or repossession and selling themselves. Unless the debt is in your name somehow, in which case it wasn't a straightforward equity release.

My friend is presently handling the estate of her mother who died earlier this year.
Her father took out 10k 25 years ago and they will be get several hundred thousand deducted.
A truly shocking amount.
I wouldn't touch them unless you were very financially literate. She can't believe her father signed it, for so little.

@Toomany,
are you a cosignee? Named as a recipient?
i have ndver heard of that, inherited debt?

Have you contacted the Financial regulator, Ombudsman, Central bank?