.. to ask for your thoughts about equity release?

[LeftieRightsHoarder]

I have an 80-year-old friend who plans to raise money on her mortgage-free home through equity release. She has a good chance of living 15-20 years more, as she is active and healthy, and comes from a long-lived family.

She has no children or other dependants, so is not bothered about having nothing to leave. But I have never heard anything good about equity release, and I fear she could find herself homeless and penniless.

I would very much appreciate advice or information from anyone who knows anything about equity release, or knows people who have tried it.

I found a useful article by impartial researchers here: https://www.durham.ac.uk/business/impact/finance/the-darker-sides-of-equity-release/

Thanks for any advice.

It is rarely a good idea, but if an 80 year old, who isn't married or has any children requires extra money to live out their final years in the comfort they deserve, then why not? This is probably the type of person who should be taking it out!

What problems are their for anyone who inherits?

They sell the house in the usual way and the loan is settled, same as a mortgage would be.

NO! tell her not to do this. She will be trapped in that property. The loan is repayable when the property is sold or she dies. If she becomes disabled, she will no longer be able to downsize to more suitable accommodation or afford a decent care home.

My PIL did this in their early 60s. MIL refused to leave her large home she had brought her family up in. They had plenty of equity and could have bought something nice with funds leftover to spend.

Fast forward nearly 30 years later. MIL who is now aged 90 and disabled is living in one room. The house is literally falling apart. FIL spent his last years in a care home (paid for by DH and his siblings) partly because the house was unsuitable. Her beloved house will eventually be sold at auction and likely demolished and redeveloped as it’s in a prime location.

We are weighing this up. Approaching 70. Smallish mortgage to pay off, moving costs and so on. Hardly worth bothering.

I said "if any". But for example for most people it means it has to be sold, so son/daughter cannot move into it without taking out their own mortgage to refinance the debt. They also want their money within 12 months which can put pressure on to sell in a slow market (instead of hanging onto the property for a bit longer). It's just an added consideration.

Equity release doesn't give you the whole value of a property either. Unless you are really quite old most reputable providers are probably going to give you maybe 30% of the property value. It's a loan you arent going to repay, with the remaining equity in the property absorbing the accruing interest.

I guess a better way of looking at it is lifetime mortgage .. equity release brings out tons of out of date misinformation. And the advice to downsize instead ... where do these people live? I could move to a house that cost £100,000 less than the one i live in, but all the upheaval and potential costs with the new house I'd rather not.

Equity release can be an interest only mortgage. And you can pay the interest to keep the debt the same, which may not be difficult as the minimum state pension is around £1,000 per month now and most are on far more. or let the debt grow, there are no negative equity guarantees..

Or of course, oldies can live in poverty and discomfort to ensure the maximum is left to the care home or the relatives (I'm in the situation of making this decision now too)

But in the case of the original OP, this really doesn’t matter. The person will be dead when the debt becomes due - and they’ll have had funds to use for whatever they need whilst alive, without worrying about the cost, stress and expense of moving.

For single people, with no dependents, equity release is definitely an option. Personally, I think most of the concern around equity release comes from children who are worried about not getting an inheritance.

My mum did ER. We knew she was going to do it. We told her to go ahead. She’d had a really tough life, she’d done everything to make things the best for us on very little. We were VERY happy that she’d been able to enjoy some much deserved happiness with the funds she released. Yes, our inheritance was very much reduced. No, we didn’t care. Devastated at losing her, but happy that her last decade had been more comfortable than the previous few.

But once the person dies they don't have to pay the loan back no matter what. All the company can take it the house ( of which they no longer have a need of)

My parents did this while in their 70s to release money which allowed them a big holiday and new car. They had a lifetime mortgage product. Before they did it we had a family meeting to discuss it and my sibling and I were happy for them to go ahead and enjoy retirement.
We knew the value of their property had increased significantly in the 30 years they’d lived in it having already downsized.
The loan amount taken was roughly 20K and after they both passed away in their mid 80s still remaining at home so no care fees the debt owed until the day the property was sold was approx 42k.
I shall always be happy of the enjoyment they got from their big holiday.
However I realise in some cases the debt mounts to crazy high amounts over years.
If someone has no children or close family to pass on an inheritance I see no reason to not enjoy their money