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.

Do not do equity release. Ever.

Don't do it ... My friend's elderly parents released equity. They then needed to sell the house to move nearer to their daughter so she could care for them. Because of all the costs (and the original property wasn't huge) they didn't have enough money left in their property to buy a local house so now have to rent!

@TheHoptimist

it is a terrible way to borrow money the interest rates end up being exorbitant if you live a long time

You can get a lifetime fixed rate, so it won't change.

@SpellBounds

Omg OP stop reading this thread there is terrible advice!! 😫 equity release is no longer (and not since the 90s) a de regulated free for all. And home reversion is totally different to equity release. AND downsizing is often more expensive with little reward when you factor in all costs.

Get some proper advice. Bear in mind high Street names such as Nationwide Building Society now offer this - tending to now use the phrase "lifetime mortgage" rather than equity release. Good luck OP but it seems lots of these posters are stuck in the 90s.

Thank god for the voice of reason !!

Yes to this OP.

@RandomLondoner

Get some proper advice. Bear in mind high Street names such as Nationwide Building Society now offer this - tending to now use the phrase "lifetime mortgage" rather than equity release. Good luck OP but it seems lots of these posters are stuck in the 90s.

Yes I think the market has got a lot better since I last looked at it. The lifetime mortgages are a much simpler and better approach. But are there any with interest rates of 3.5% or less? Because I would regard any higher as poor value. My recollection is that they have much higher rates. If the rate is say 5%, that doesn't compare well to the 1% five-year fixed rate someone I know has just go on a conventional mortgage. (A working person, to be clear.)

Yes they do have 3.5% or less interest rates.

A lot of them are lower than 3.5%.

@Queenoftrivialpersuit

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.

Not sure when this was taken out, but the current lifetime mortgages don't apply early repayment fees if the last survive client moves to a care home?

Is your father still living in the property?

@Yants

Surely Equity Release can make sense in some situations?

i.e if you have no kids so no concerns over depriving them of an inheritance and if you already live in a small, modestly price house so downsizing isn't really an option.

Yes, baffled as to why it is dismissed out of hand. I am definitely going to explore equity release when the time comes. We will downsize first but neither DH nor I have good pension provision as we have moved around a lot. But we both had good jobs and paid off our mortgage when we were in our late 30s and early 40s.

We don’t have children so are not worried about what we leave behind. We can’t live off bricks and mortar so if we get money to live on and the company gets the house after we are both gone we are happy with that. As I will be dead, I will not be worrying that the asset is ultimately worth more than the cash they gave me.

Don’t do it.

My PIL did about 20 years ago. They were in their 60s. They took out about £60k. The house is worth at least ten times that and the bank will own it when MIL dies or goes into care.

You will be stuck in the house for life. My PIL were unable to downsize as they became sick and disabled. This led to FIL going into a nursing home paid for by his kids and their spouses and MIL being trapped in unsuitable accommodation as she became disabled.

Again her kids had to fork out for adaptations, stairlift, downstairs disabled bathroom etc and repairs.

Once you do it you have no option to downsize or move into more suitable accommodation and you also have little left in terms of equity to pay for care that you are likely to need further down the line.

MIL is stuck in a lovely but crumbling house. She can not longer access most of it or the garden. She no longer has the option of downsizing; or moving closer to her DD who is her main support and is relying on her kids to pay for carers and eventually a care home as she no longer has the means to do so.

However much you love your house you need to be realistic and think about downsizing now into accommodation that may be more suitable for your old age and won’t be a burden for your family.

@Worriedofkent

Don’t do it.

My PIL did about 20 years ago. They were in their 60s. They took out about £60k. The house is worth at least ten times that and the bank will own it when MIL dies or goes into care.

You will be stuck in the house for life. My PIL were unable to downsize as they became sick and disabled. This led to FIL going into a nursing home paid for by his kids and their spouses and MIL being trapped in unsuitable accommodation as she became disabled.

Again her kids had to fork out for adaptations, stairlift, downstairs disabled bathroom etc and repairs.

Once you do it you have no option to downsize or move into more suitable accommodation and you also have little left in terms of equity to pay for care that you are likely to need further down the line.

MIL is stuck in a lovely but crumbling house. She can not longer access most of it or the garden. She no longer has the option of downsizing; or moving closer to her DD who is her main support and is relying on her kids to pay for carers and eventually a care home as she no longer has the means to do so.

However much you love your house you need to be realistic and think about downsizing now into accommodation that may be more suitable for your old age and won’t be a burden for your family.

You can port a lifetime mortgage, just the same as you can a mortgage.

@Worriedofkent

Don’t do it.

My PIL did about 20 years ago. They were in their 60s. They took out about £60k. The house is worth at least ten times that and the bank will own it when MIL dies or goes into care.

You will be stuck in the house for life. My PIL were unable to downsize as they became sick and disabled. This led to FIL going into a nursing home paid for by his kids and their spouses and MIL being trapped in unsuitable accommodation as she became disabled.

Again her kids had to fork out for adaptations, stairlift, downstairs disabled bathroom etc and repairs.

Once you do it you have no option to downsize or move into more suitable accommodation and you also have little left in terms of equity to pay for care that you are likely to need further down the line.

MIL is stuck in a lovely but crumbling house. She can not longer access most of it or the garden. She no longer has the option of downsizing; or moving closer to her DD who is her main support and is relying on her kids to pay for carers and eventually a care home as she no longer has the means to do so.

However much you love your house you need to be realistic and think about downsizing now into accommodation that may be more suitable for your old age and won’t be a burden for your family.

Why did you all pay for the care home? If a person doesn’t have the funds to pay, the state pays. Yes, you could pay a top up if you choose to, but can’t be forced to.

@papayaorange

Yes you are.

As the lender is going to probably have to wait 20 years or more for their money back, this will be factored into the amount they'll lend you and the interest will have years to roll up. You also pay interest on the interest so the repayment amounts are staggering.

These will be shown in any quote you get so make sure you really take on board what they show.

What happens if you do want a smaller house in your late 70s? Whilst you don't want to downsize now, you may well by then if the house becomes too hard to manage.

You will also be expected to insure and maintain the house to an acceptable standard.

Is the loan transferable? If it isn't then you may not have enough money to buy a suitable replacement property and will be effectively trapped. This is where the repayment amounts start to bite.

Please take proper independent legal and financial advice if you are seriously considering this.

@SpellBounds

Omg OP stop reading this thread there is terrible advice!! 😫 equity release is no longer (and not since the 90s) a de regulated free for all. And home reversion is totally different to equity release. AND downsizing is often more expensive with little reward when you factor in all costs.

Get some proper advice. Bear in mind high Street names such as Nationwide Building Society now offer this - tending to now use the phrase "lifetime mortgage" rather than equity release. Good luck OP but it seems lots of these posters are stuck in the 90s.

This is what I was going to say! Equity release/later life lending generally still has this boogeyman reputation but it's much more tightly regulated now and there are plenty of scenarios where ER/home reversion would make sense for older borrowers.

A lifetime mortgage might not be for you OP (although if your husband's concerned, you can ringfence some of the value for inheritance for your children with some of the products available) - but a home reversion could be a choice to consider.

Speak to a good adviser who'll be able to talk you through the options, including the tax and inheritance implications.

@SwedishEdith

What happens if one of you needs paid care? How does equity release work then?

My dad took equity realease in the early 90s to clear his business debts. £15,000. He died 26 years later, when we sold the house the debt had grown 10 £10,000, the house sold for £135,000, so most of it gone, the sMy, then had to go into care, firstly 25into s flat with minimum help, then a flat with onsite carers to help her, then into a care home with 24 hour care. As she has no assets

Equity release is a really poor deal. You'd be better to downsize and free up some capital and enjoy it. Your kids will still have an asset to inherit.

If things are a bit tight now, it's going to get much worse ; in a few years time you'll be struggling to heat a large property.Even if you have always done all your own decorating/maintenance/gardening, in a few years time that will be much harder and you'll need to pay someone to do it.

When one of you becomes frail then dies, the other will struggle to manage a big house and be rattling around. Far better to have a home that's appropriate to your age and needs ( I'd recommend, large downstairs bath/walk in shower, a downstairs bedroom, walk in shower; consider access to busroutes /shops facilities if you can no longer drive. 2 beds, one for guests, or one each if one becomes disabled). Cheaper bills. Get rid of a lot of unwanted clutter

Now is the time to downsize, while you have the energy to househunt, pack, move, settle in a new place.  Don't wait until one of you is  ill /less mobile,.  I've seen older friends very rapidly  lose  most mobility and  too late then for the  stress of stairs,   househunting. etc.

How about downsizing. Equity release isn't the best way to free up money.

@Lincslady53 interest rates in 1990s were a lot higher than now..... makes a whole difference.

Why us there not an edit function on this site?
My dad took equity realease in the early 90s to clear his business debts. £15,000. He died 26 years later, when we sold the house the debt had grown to £125,000, the house sold for £135,000, so most of it gone, the surplus mainly went on selling costs. My mum then had to go into care, firstly into a flat with minimum help, then a flat with onsite carers to help her, then into a care home with 24 hour care. As she has no assets virtually all the costs have been picked up by the local council. She has been lucky, as the 2 flats were excellent, the first brand new, the second about 10 years old, and the care home is also modern, clean with good report. To be honest, in the condition my mum is in, it wouldn't matter to her what the home looked like, as she is in a poor way mentally.
My advice would be to hold off equity release as long as possible, downsize first, then equity release. Or do your sums and see if you sell up and move into rented, will you have enough to last you. One of our friends has sold up and moved into a rented flat and couldn't be happier - no maintenance and repairs to worry about, can lock up an go on holiday with their flat secure.

@inheritancetrack

How about downsizing. Equity release isn't the best way to free up money.

Isn't it?

[quote Offmyfence]@Lincslady53 interest rates in 1990s were a lot higher than now..... makes a whole difference.[/quote]
I know, we have been looking at it ourselves, but the younger you are when you start the more it will cost you. I have a deep mistrust of financial institutions. The bank totally ripped off my dad on his house insurance, charging him £1,600 a year and never offering any alternative, we have been ripped off on endowment policies, ppi, whenever you have a claim on insurance it is a battle to get the full payout. So I would be very wary of equity release, and have a professional read the contract and explain what it will cost you overall. Even now, car insurance renewal should be the same as a new customer (new legislation from next week) so many insurance companies have introduced admin fees and renewal fees on top of the price of the policy. Treat them all as sharks after your money, and check, check, check.

I’m in a similar situation to you OP. We are going to down size in the next couple of years, help the DDs with a decent lump sum and spend a fair bit on our bucket list. Equity release just didn’t make economic sense when we looked into it.

know, we have been looking at it ourselves, but the younger you are when you start the more it will cost you. I have a deep mistrust of financial institutions. The bank totally ripped off my dad on his house insurance, charging him £1,600 a year and never offering any alternative, we have been ripped off on endowment policies, ppi, whenever you have a claim on insurance it is a battle to get the full payout. So I would be very wary of equity release, and have a professional read the contract and explain what it will cost you overall. Even now, car insurance renewal should be the same as a new customer (new legislation from next week) so many insurance companies have introduced admin fees and renewal fees on top of the price of the policy. Treat them all as sharks after your money, and check, check, check.**

Yeah, don't do it! Imagine that you borrowing money over 30 years instead of 10 comes as a surprise it costs you more.... 🙄!

Don't like the fees (which pays for the advice) don't do it, don't have the advice.

I think thar if you make a considered decision it can be sensible
My pil did it. Asset rich, cash poor. They took out about 50k. Gave them peace of mind to have money in the bank for once.
In actual fact, their home continued to go up in value so by the time they died, the house value had increased more than the loan.
Thr sensible thing for them to do was to downsize but it was their choice as competent adults.

My Mum did it when she was in her 60s and there was no interest as such. When she died I inherited half and the other half went to the equity release company. Whatever happened with house prices it would have been a 50/50 split.

Mum didn't want to do it but she had no option if she wanted to stay in her home after my Dad died.

@SpiderinaWingMirror

I think thar if you make a considered decision it can be sensible My pil did it. Asset rich, cash poor. They took out about 50k. Gave them peace of mind to have money in the bank for once. In actual fact, their home continued to go up in value so by the time they died, the house value had increased more than the loan. Thr sensible thing for them to do was to downsize but it was their choice as competent adults.

Exactly, asset rich, cash poor and low interest rates.

I'm in my 70s and wouldn't touch equity release with a bargepole. If/when I need to release funds from my home I would rather downsize/move to a cheaper area.