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.

I am glad so many people have come on to say Equity Release is a bad idea. Seems to be a way to confusing people out of their money and their property. Much better to downsize and own the property outright.

Please, please do not do this. Equity release is not a good deal and will probably turn out to be the endowment mortgage of the 21st century.
You have other options, such as downsizing.
I would talk to an IFA about your situation and have another look at your current budget plus what exactly you want/plan to do with any capital sum.
Much as I understand your husband's desire to leave an inheritance to your children, your priorities, at this stage, should be securing the standard of living you would like to enjoy in your retirement.

@CharSiu

He wants to leave an inheritance more than you that’s the crux of it. What sort of position are your dc in?

Unless someone has a child who has a disability that means their potential was always going to be curtailed then I think going without to leave an inheritance is a bit daft. However equity release schemes are generally not good value. I’m assuming you are very emotionally attached to your home?

MIL is selling her home next year to release capital. Though if she could budget she wouldn’t need to. DH was going through her statements yesterday at her request. She is £200 short per month roughly but could save almost all of it but she won’t give up her private dentist, all organic food and many other things. At least he spotted her overpaying for things she doesn’t use on her internet and telephone provider, paying almost £30 more than she needs per month. It has made us really scrutinise our retirement plans, we have good pensions but our income will still halve.

She should keep her private dentist!

@Ukholidaysaregreat

I am glad so many people have come on to say Equity Release is a bad idea. Seems to be a way to confusing people out of their money and their property. Much better to downsize and own the property outright.

Goodness these comments are starting to border on ridiculous. Did you know part of the process of equity release is to receive independent legal advice from a solicitor (one that is completely independent and nothing to do with the company dealing with the equity release application) and did you know that this comes from regulation and isn't just something the companies themselves do so it safeguards the clients and ensures they fully understand what they're doing. So after several meetings with the advisor where they're also encouraged to bring along friends or family etc etc they then also speak to a solicitor and lots of other checks are done (including sometimes consulting GPs with the clients consent should there be any doubts at all on their ability to understand) before proceeding. Sometimes this part can take many months.

So in conclusion it's not easy to "confuse someone" into equity release and is world's away from what went on pre regulation.

I suggest you have a read on the equity release Council website if you'd like to understand more before trotting out ridiculous comments.

@FelicityFlops

Please, please do not do this. Equity release is not a good deal and will probably turn out to be the endowment mortgage of the 21st century. You have other options, such as downsizing. I would talk to an IFA about your situation and have another look at your current budget plus what exactly you want/plan to do with any capital sum. Much as I understand your husband's desire to leave an inheritance to your children, your priorities, at this stage, should be securing the standard of living you would like to enjoy in your retirement.

See my above comment. I actually agree with you that pre regulation in the 80s/90s there were very dubious plans and terms and conditions to equity release - I know because I still meet elderly clients who took these out. However since regulation equity release is totally different in every way, as above maybe have a read on the ERC website if you'd like some knowledge around the subject.

I would never use equity release. A relative did and I was shocked at the terms - real sharks! I would downsize in your situation.

Please be extremely careful with equity release, as most times you'd be better to get a long-term mortgage secured against the property.

In equity release the interest is so high that at the end of the term, when you die there is no money left at all.

This mse post helps explain it - and tells of the awful stories where people have lost everything www.moneysavingexpert.com/mortgages/equity-release/

@catwomandoo

Please be extremely careful with equity release, as most times you'd be better to get a long-term mortgage secured against the property.

In equity release the interest is so high that at the end of the term, when you die there is no money left at all.

This mse post helps explain it - and tells of the awful stories where people have lost everything www.moneysavingexpert.com/mortgages/equity-release/

If only equity release was a long term mortgage secured against the property!!

@catwomandoo

Please be extremely careful with equity release, as most times you'd be better to get a long-term mortgage secured against the property.

In equity release the interest is so high that at the end of the term, when you die there is no money left at all.

This mse post helps explain it - and tells of the awful stories where people have lost everything www.moneysavingexpert.com/mortgages/equity-release/

🙄🙄🙄🙄🙄🙄

@SpellBounds if only equity release was a long term mortgage secured against the property! Just if only!

I would really not want to do equity release in what appears to be the OPs circumstances.

However Equity Release is a long-term mortgage (Loan) secured (Charged) against the property. Placing a charge over the Deeds of the property ensures payment of money owed (according to agreement reached when taking out the loan, there is unlikely to be any case when equity release by a bank/building society etc doesn't ask for a charge over the property ).
However importantly here (generally) you are not paying off the capital or the interest on the mortgage/loan (this is accumulating compound interest- which can really add up).
The compound interest is the issue here.
For example earlier on I posted the costs of a £110,000 equity release loan/mortgage charged at 7% for 13 years. The loan and interest would be £265,082.

It is best to look at how compound interest can work for you (savings/investments) or against you (mortgages/loans, especially if not paying off the interest). Link:www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

@nokidshere

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 😁

So she started off with £200k equity and ended up with £135k equity. Hardly a whopping deal and there’s absolutely no guarantee house prices would continue to rise in a similar way.

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

Post from PP

[quote yoyo1234]I would really not want to do equity release in what appears to be the OPs circumstances.

However Equity Release is a long-term mortgage (Loan) secured (Charged) against the property. Placing a charge over the Deeds of the property ensures payment of money owed (according to agreement reached when taking out the loan, there is unlikely to be any case when equity release by a bank/building society etc doesn't ask for a charge over the property ).
However importantly here (generally) you are not paying off the capital or the interest on the mortgage/loan (this is accumulating compound interest- which can really add up).
The compound interest is the issue here.
For example earlier on I posted the costs of a £110,000 equity release loan/mortgage charged at 7% for 13 years. The loan and interest would be £265,082.

It is best to look at how compound interest can work for you (savings/investments) or against you (mortgages/loans, especially if not paying off the interest). Link:www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php[/quote]
The interest rates are no longer 7%!!!!!!!

FFS!!!

At your agE, which is pretty young to be fully retired, would you not be better both getting a part time job?

In post prior I say Google amounts I also mention rates can vary. I give people the links so they can do their own maths/calculations (and I can spot maths issues in past posts). I posted a worked example.

Making the most of all your assets for a comfortable life is not unreasonable. If one of you lives for 25 years more your children will probably be retired before they inherit anyway. Just look at all the options- not just equity release. Proper financial advice and planning is essential.

I can spot maths issues in past posts by PPs.

@yoyo1234

In post prior I say Google amounts I also mention rates can vary. I give people the links so they can do their own maths/calculations (and I can spot maths issues in past posts). I posted a worked example.

Have you had a lot of wine? Because your post makes zero sense!

You may be pissed off that you didn't get the inheritance that you though you would, but that's life.

Equity release in some circumstances is right!!

@anniegun

Making the most of all your assets for a comfortable life is not unreasonable. If one of you lives for 25 years more your children will probably be retired before they inherit anyway. Just look at all the options- not just equity release. Proper financial advice and planning is essential.

Exactly!!

No wine consumed before I posted :

"In post prior I say Google amounts I also mention rates can vary. I give people the links so they can do their own maths/calculations (and I can spot maths issues in past posts). I posted a worked example."

This post is fine. In a previous post I have told people to Google rates for equity release, I also mentioned rates can vary. I then repeated a past worked example (£110,000 loan at 7% for 13 years is £265,082). I did this as it is not £180,000 as a PP had incorrectly stated (hence my comment about spotting maths errors in PP). I was worried people may have read the incorrect amounts the PP had stated and I wanted to demonstrate how the compound interest can add up (hence worked example).

[quote SpellBounds]@Offmyfence

Finally some more words of reason!! I was starting to think I was the only one with any modern and genuinely informed views rather than harping on about plans taken out in the 80s/90s etc.[/quote]
I would suggest more the words from someone who has a vested interest in people choosing equity release.

@Crankley equity release is an extremely small part of my job as an IFA! I'm not going to be eating beans on toast for life if no one ever takes out an ER plan again. It's a one off transaction and has no ongoing fee payable to us. We don't actually lend the money, that's the provider. We give advice.

But for some people it is the best option. Lots of people are property rich and cash poor and don't want to move.

All those saying moved area. downsize, it's not always possible.

Are you always so suspicious?

Getting really sick of posters constantly going on about how people should downsize as an alternative to Equity Release, they obviously seem to be under the impression that everyone lives in a 4 bed detached worth £400k.

I wouldn’t unless you absolutely have no other choice. In fact our broker strongly recommends against them. They are so expensive, your home will belong to the provider quicker than you’d think with compound interest. It makes moving (eg downsizing) really difficult. Just no all around.