To think about Equity Release

[papayaorange]

My husband and I are mid 60's. We live in a large house we both love but are asset rich and cash poor. I suggested that we release a bit of money from the house which has a lot in it, so that we can buy a new car and have some good holidays. We only have our state pensions and a small company pension. My husband is dead against it as he says it is spending the children's inheritance. What would you do.

* Please don't even entertain the idea. If you want to release some equity then downsize instead.*

^This

@SpellBounds

Lifetime mortgages and home reversions are both types of equity release. Neither are cheap or particularly sensible ways of borrowing money when someone is “asset rich”

OP Martin Lewis has covered this on MSE I suggest you start there.

www.moneysavingexpert.com/mortgages/equity-release/#whatisit

[quote PegasusReturns]@SpellBounds

Lifetime mortgages and home reversions are both types of equity release. Neither are cheap or particularly sensible ways of borrowing money when someone is “asset rich”

OP Martin Lewis has covered this on MSE I suggest you start there.

www.moneysavingexpert.com/mortgages/equity-release/#whatisit[/quote]
As a qualified and trading financial planner I don't think I'll be perusing Martin Lewis for advice thanks! And it's right to specify home reversion rather than umbrella them all under "equity release" as this is where the confusion and fear etc comes in from most people.

Depending on the value of your home, you could downsize, keep some of the equity and gift some now to your children in lieu of an inheritance, which they may not receive for another 30 or so years!

@SpellBounds for someone who “understands all options” you seem quite biased in favour of equity release. Surely you must understand the potential impact of compound interest for someone in their 60s?!

Equity release is massively dependent on circumstance, however for those wishing to leave an inheritance it’s generally a raw deal, particularly so the younger you are!

In your 60s you’re likely to be miles better off downsizing (if factoring in leaving something to your kids). Don’t forget if you downsize there’s the potential to then use equity release in the future, it’s quite difficult to release further equity once you’ve taken an initial equity release and the money might have to last you a bloody long time!

Most rates are now between 2%-5% and most places no fees now too. It can work fantastically well for many people and is essentially just a flexible mortgage these days.

@SpellBounds no it’s not essentially just a flexible mortgage and I’m amazed as a “qualified” person you’re perpetuating such rubbish.

Do not do equity release. My inlaws 'borrowed' 50k. Actually only spent about 10k of that and it's just cost 250k to pay back. 250k to spend 10k!!!!!

You'd be better off downsizing.

Be careful of the terms and conditions attached. Family members did this, one then died suddenly. The surviving partner decided after a year or so that he wanted to be closer to family, but to repay the loan and be allowed to sell the house he had to pay £80k in early repayment fees and interest, which was far more than the original equity they released. He ended up with a 1 bed flat and no money in the bank from selling a 3 bed house.

As a qualified and trading financial planner I don't think I'll be perusing Martin Lewis for advice thanks!

Perhaps you should. Whilst you’re at it I suggest looking at the terms of your PI insurance which prohibits you from making the statements you have online.

I would think long and hard about this .New Cars and holidays are all very nice,but it is not good value when you are paying interest and will not have anything to show for it on a rather expensive loan! Can you downsize at all ,This would make more sense . It may be worth seeing if you are entitled to any pension credit maybe ?

I would say downsize too.

Somewhere cheaper to heat, lower council tax, easier garden etc. consider your longer term needs.

Then keep spend what's left!

You would be better off selling your home and buying something smaller. That would release some equity but you would keep hold of your home. Unless you both have very poor health you could look forward to another 20 odd years left. Could you ask your children to help you look for a smaller home and help with packing and moving for you?

I wouldn't be doing it just for holidays. I thought it racked up massive interest over the years.

@PegasusReturns

As a qualified and trading financial planner I don't think I'll be perusing Martin Lewis for advice thanks!

Perhaps you should. Whilst you’re at it I suggest looking at the terms of your PI insurance which prohibits you from making the statements you have online.

What statements are those exactly? On an anonymous forum too!

@RosieGuacamosie

Most rates are now between 2%-5% and most places no fees now too. It can work fantastically well for many people and is essentially just a flexible mortgage these days.

@SpellBounds no it’s not essentially just a flexible mortgage and I’m amazed as a “qualified” person you’re perpetuating such rubbish.

But it is and can be?or are you still looking at home reversion and straight up equity release from the 90s. Have a good read about lifetime mortgages, RIO etc.

[quote RosieGuacamosie]@SpellBounds for someone who “understands all options” you seem quite biased in favour of equity release. Surely you must understand the potential impact of compound interest for someone in their 60s?!

Equity release is massively dependent on circumstance, however for those wishing to leave an inheritance it’s generally a raw deal, particularly so the younger you are!

In your 60s you’re likely to be miles better off downsizing (if factoring in leaving something to your kids). Don’t forget if you downsize there’s the potential to then use equity release in the future, it’s quite difficult to release further equity once you’ve taken an initial equity release and the money might have to last you a bloody long time![/quote]
Not biased. One of many options. And the interest doesn't need to be compounded at all should you choose to make payments. I'm just countering all the bad press on this thread that clearly comes from some old skool misconceptions.

Even if you want to leave money for family it doesn't mean you can't live your lives! I would be so upset if my parents held back on their lives in order to give me a better inheritance. Life is for living you can do both even if its a bit less of an inheritance. Go and enjoy yourselves you have worked hard for it.

Don’t ever do this
My god. My mum did it. 30k now she’s in a care home and we cannot sell the house and we own them 100k
If we want to sell the house we will pay another 8k in early release.

Equity release is simply another form of mortgage. As long as you take proper legal advice and look for deals it's no worse than any other loan from a financial institution.

In terms of 'what happens if you need care' the answer is nothing if there is a spouse living in the house, the same as everyone else. The equity release mortgage is simply paid off when you (or both parties) die and what's left is your estate. The same as any other mortgage.

MIL upsized from a 2 bed flat near the coast to a 4 bed detached near us. She used equity release on her flat to pay the difference.

She 'borrowed' (obviously no repayments) £110k and when she died 13 yrs later we sold the house and paid them back approx £180k. The rest of the proceeds were ours and amounted to around £150k. However, at the point she took out the equity release interest rates were much higher than now at 7%.

There are new types of equity release now which allow you to pay towards the interest so that less is compounded. There are also caps on how much % of equity you can borrow. I don't know why there is so much hysteria around these loans. As long as you know exactly what you are getting and what you will be paying back they are as safe as any other mortgage. The company that handled MILs were fantastic at explaining it all to her, spoke to her alone to make sure we weren't talking her into/out of it, and kept in touch with her at all times.

If you want to stay in your house and aren't bothered about the amount you finally leave to your estate then go for it with proper advice.

I wouldn't take out a mortgage for a new car or a holiday, I see equity release pretty much the same as that tbh. Like many others I would downsize instead, if your kids have all they need they will not complain about you enjoying your money.

@Alpinechalet

You would be far better to downsize and spend the newly released cash.

Far to many people leave it too late to downsize and end up watching their house deteriorate around them as they can no longer maintain it.

I'd agree with this - a widowed neighbour of my Father's was desperately lonely, she would have loved to move closer to her son and grandchildren, Because she and her husband had entered into an ER scheme before his death, she was tied to living in that property - I don't know the detail of it, but do get proper advice and look at alternatives (& I don't mean scrimping and saving to leave it for your children) before you decide.

Because she and her husband had entered into an ER scheme before his death, she was tied to living in that property - I don't know the detail of it, but do get proper advice and look at alternatives (& I don't mean scrimping and saving to leave it for your children) before you decide.

You can sell the house at any time regardless of how much you borrowed or wether one or both parties are still alive. You can transfer the equity release to a new property or you can pay it off and keep what's left. At no point are you stuck in the property with the loan on it.

I personally would not do this. We have a neighbour who released £35k 7 years ago. They already now owe £70k! The interest keeps accumulating. On that basis before they die they will owe more than their property will be worth. They tried to exit the agreement to move into a retirement flat and found the exit charges were so high it made no financial sense. I agree with others when they say you should get independent financial advice and down size if you wish to release equity.

I personally wouldn’t touch equity release with a barge pole - you could live for another 25/30 years and the debt you take out now would just get bigger and bigger and bigger. If you are considering it, at the very least take decent independent financial advice. In my opinion far better to release equity by downsizing.

Not read the whole thread, but just saying that when I sought advice from “Key Equity Release”, I was early 60’s.
Reason was because I wanted to financially help my only child whilst I was still alive, rather than waiting til he inherited any assets accumulated up til my demise.
I was lucky enough to have an upfront and honest advisor, who said that although he would respect my choice, he strongly advised against it due to what it would actually cost if I started it so young.
I honestly can’t remember the ins and outs of the advice, but after the consultant (it was a home appointment) left, I realised how lucky I had been to have had such an honest man to advise me.
He also said that if I were to consider it at all, to wait at least another 10/15 years.
I’ve grown a lot wiser since that appointment, and I too have read the Martin Lewis website on ER…..
I’m sorry I can’t advise you on how else to raise money, but try looking at a site named “Money Magpie” there’s loads of suggestions on there. You may need to do a fair bit of scrolling through the site to find the many ways to raise cash, and maybe none will suit you, but equally you may find an answer to your problems in a safer way.
I don’t think it’s for me or others to say you shouldn’t spend your tied up money on your children, only you two as a couple must weigh up the pros and cons. For me, as it turns out, not being able to help my son financially from ER was a good decision for both of us…. He’s doing absolutely fine independently, and he would’ve been upset if I had taken unnecessary risks.