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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To think about Equity Release

203 replies

papayaorange · 28/12/2021 13:40

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.

OP posts:
yoyo1234 · 30/12/2021 19:53

Compound interest when it is in your favour (investing) is great; when it goes against you not so good. Below is a calculator link. Look at what your interest could be charged when borrowing easily in excess of 20years (given OPs age) . This is without some of the schemes that take a percentage control of the asset (i.e.house)-these can really eat in to asset value to the costs of £100,000s. An accumulating amount owed could lead to issues with downsizing later. www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

Offmyfence · 30/12/2021 19:57

[quote yoyo1234]Compound interest when it is in your favour (investing) is great; when it goes against you not so good. Below is a calculator link. Look at what your interest could be charged when borrowing easily in excess of 20years (given OPs age) . This is without some of the schemes that take a percentage control of the asset (i.e.house)-these can really eat in to asset value to the costs of £100,000s. An accumulating amount owed could lead to issues with downsizing later. www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php[/quote]
But surely it depends on what the interest rate is?

If it's 2%, and house prices are rising by 3%, downsizing is a non issue

If it's 20% and house prices are rising by 2% it's an issue.

So, what interest rates do you think current equity release mortgages have?

Offmyfence · 30/12/2021 19:58

[quote yoyo1234]Compound interest when it is in your favour (investing) is great; when it goes against you not so good. Below is a calculator link. Look at what your interest could be charged when borrowing easily in excess of 20years (given OPs age) . This is without some of the schemes that take a percentage control of the asset (i.e.house)-these can really eat in to asset value to the costs of £100,000s. An accumulating amount owed could lead to issues with downsizing later. www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php[/quote]
I'd also compound interest rates on current investments are shockingly low! Interest rates (even with the recent rise) are at an all time low.

yoyo1234 · 31/12/2021 00:15

When you are doing it over time periods that the OP maybe doing it for it adds up. Also depending on what you choose it may not be fixed for life so interest rates you get now are not those in a few years time. On top of that if you argue increased house prices you may want to think what about your potential grandchildren (how are they to get on the property ladder etc, you may want to rethink the idea of not passing on an inheritance for their generation). OP says her children are not bothered now (few children would say they are, but what about if they see their children are struggling). A bet on house prices rising is against future generations.

yoyo1234 · 31/12/2021 00:19

The equity release percentages of people I know have been circa 3.5% to greater than 5%. For current rates posters can Google that ( bear in mind they can change and generally not as favourable as conventional mortgages).

KarmaStar · 31/12/2021 09:25

Arguably,I can see your husband's point,what I work hard for is not to have the best of everything,but to have something decent to leave my dc to help them in life.I know there is no way of seeing what the future holds so it may have to go on other things but I really want to help my dc to attain their dreams.they work very hard.

Offmyfence · 31/12/2021 09:32

@yoyo1234

The equity release percentages of people I know have been circa 3.5% to greater than 5%. For current rates posters can Google that ( bear in mind they can change and generally not as favourable as conventional mortgages).
Not entirely true!

Also people don't tend to use them instead of conventional mortgages, it's a different product. The comparison is irrelevant.

BalladOfBarryAndFreda · 31/12/2021 09:35

It’s very clear you are an ER sales person, @Offmyfence. We get it, you are in favour.

OP, please just get good quality independent advice before taking any financial product

Offmyfence · 31/12/2021 10:22

@BalladOfBarryAndFreda

It’s very clear you are an ER sales person, *@Offmyfence*. We get it, you are in favour.

OP, please just get good quality independent advice before taking any financial product

I am not an equity release salesperson, I'm an an IFA!

I'm not sure an equity release salesperson exists, does it?

I just disagree with people that know very little, thinking they're an authority.

Offmyfence · 31/12/2021 10:32

@BalladOfBarryAndFreda

It’s very clear you are an ER sales person, *@Offmyfence*. We get it, you are in favour.

OP, please just get good quality independent advice before taking any financial product

I'm also not particularly in favour or not in favour, a full financial assessment would need to take place.

What I am saying is for some people it is the best option.

For people who know very little, to come on and say it's for mugs is misinforming.

Anyway I hope I've got my points across, if you are considering make an appointment with an IFA. Don't take your information from people on the internet.

Most IFAS will give a first meeting at their expense. Do check first though.

yoyo1234 · 31/12/2021 10:51

Please do not say I know very little about equity release schemes (and their effects) -it is not true. Please do not say you appear to know the rates people I know with these schemes have (it is an anonymous forum Hmm yet you say "not entirely true!" I was careful in using the word "generally" as well).

tttigress · 31/12/2021 10:54

I understand your point but equity release is a scam.

Can't you down size, or take out a loan.

I would be very careful with equity release.

Offmyfence · 31/12/2021 10:56

@tttigress

I understand your point but equity release is a scam.

Can't you down size, or take out a loan.

I would be very careful with equity release.

🙄
tttigress · 31/12/2021 11:00

Could you not explain the situation to your children and see if they have any input, as they will be the beneficiaries of the house.

Maybe they could take out a loan in order for you not to do equity release.

Basically, I would consider all opinions possible, but DO NOT DO EQUITY RELEASE!!

tttigress · 31/12/2021 11:09

@Offmyfence you seem to be the only person on this thread that thinks equity release might be a good idea

NoNameHere12 · 31/12/2021 11:12

Downsize and SPEND the cash or it’s just going to a care home anyway. Unless you are filthy rich people don’t get inheritance these days as people live too long throughout illnesses too.

Offmyfence · 31/12/2021 11:18

[quote tttigress]@Offmyfence you seem to be the only person on this thread that thinks equity release might be a good idea[/quote]
I think you should read the full thread and then comment again. More than me have said the same, it's just the empty vessels are making the most noise.

I have not said it's a good idea for everyone, I have said it's a consideration.

You clearly have severe comprehension issues, which at least shows that people that you're not someone to take advice from.

seekingasimplelife · 31/12/2021 11:32

@tttigress 'I understand your point but equity release is a scam.
Can't you down size, or take out a loan.
I would be very careful with equity release'.

It's not a scam. And as for taking out a loan...equity release is a loan!! Usually at a fixed rate, low interest.

@tttigress '@Offmyfence you seem to be the only person on this thread that thinks equity release might be a good idea'

Have you actually read all of the posts on this thread of those who've had recent experience of equity release? Or read anything about what's actually on offer for equity release in 2021?

nokidshere · 31/12/2021 11:39

@tigress with respect you are talking rubbish. Why would you want your children to take out a loan for you? That's bizarre.

Here's how MILs equity release worked.

2003 bought house worth 260k with deposit from equity release on her flat of 110k interest rate was 7%

2016 she sadly died. We sold the house for £315k. Paid back equity release which was now £180k and the rest, approx £140k, came to us.

It was a win win all round made better (for us) by the rise in house prices. MIL got to live next door to us and see her grandchildren every day instead of a hundred miles away.

Everything was explained clearly, the solicitor walked her through every step, we were well aware that our perceived inheritance would be greatly reduced. It's all in the detail. Proper independent financial advice and looking at other options. Interest was fixed for the duration of the loan. There were no surprises.

There are pitfalls in any major transaction in your life. Equity release is simply another way of getting finance and, if you choose the right company all will be well.

Offmyfence · 31/12/2021 11:52

[quote nokidshere]@tigress with respect you are talking rubbish. Why would you want your children to take out a loan for you? That's bizarre.

Here's how MILs equity release worked.

2003 bought house worth 260k with deposit from equity release on her flat of 110k interest rate was 7%

2016 she sadly died. We sold the house for £315k. Paid back equity release which was now £180k and the rest, approx £140k, came to us.

It was a win win all round made better (for us) by the rise in house prices. MIL got to live next door to us and see her grandchildren every day instead of a hundred miles away.

Everything was explained clearly, the solicitor walked her through every step, we were well aware that our perceived inheritance would be greatly reduced. It's all in the detail. Proper independent financial advice and looking at other options. Interest was fixed for the duration of the loan. There were no surprises.

There are pitfalls in any major transaction in your life. Equity release is simply another way of getting finance and, if you choose the right company all will be well.

[/quote]
Exactly, now rates are a lot lower than 7%.

It is a consideration, perfectly suitable for some.

yoyo1234 · 31/12/2021 13:17

The maths in the below post does not appear to make sense :

"Here's how MILs equity release worked.

2003 bought house worth 260k with deposit from equity release on her flat of 110k interest rate was 7%

2016 she sadly died. We sold the house for £315k. Paid back equity release which was now £180k and the rest, approx £140k, came to us."

So £110,000 borrowed for 13 years at 7% (and this would be compound interest as well) and only £70,000 paid in interest.....Confused. There was benefit in rising house prices (not for your children) this is not due to whoever set up the transaction.

Importantly this set up was presumably for someone older than OP (still 13 years on 7% compound interest) who was happy to reinvest the equity release (rather than for holidays and new cars), who seems to have kept a flat and had enough in savings to get the rest of the £150,000 for the house. All so different from the tiny amount that can be gleamed from OP.

yoyo1234 · 31/12/2021 13:31

£110,000 at 7% compound interest (calculated yearly) for 13 years is £265,082.

nokidshere · 31/12/2021 21:47

DH says I got it wrong, apparantly he thinks she borrowed more like 60/70k and the interest rate was 6%. Clearly maths isn't my strong point lol

But she bought the house for 260k
We sold the house for 315k
We paid them back £180k

Those figures are correct 😁

BigYellowHat · 01/01/2022 13:48

Downsizing is what we’re planning. We’ve just moved from a 3 bed semi to a 4 bed detached and we love it. However, when we get older and want to work less/retire, we plan to buy somewhere outright that’s smaller. Maybe even smaller than the semi as it’ll just be the two of us. Then I reckon we can be mortgage free by our early fifties rather than late sixties 😁

Lurkerlot · 01/01/2022 13:49

Spend the inheritance