AIBU to wonder why a pensioner struggling financially would not use housing equity?

[Powerbungalow]

I'm not being unsympathetic

Theres a lady on the news at the moment, saying how times are tough and shes only cooking one meal a week - imagine she's eating cold food.

One thing that stood out though "I own my own house and it costs in maintenance" Depending on where she is, would you not get a life time mortgage or sell and rent? She has a big asset, why not use it to have a better life? I know I would.

She may be holding on to it for inheritance, but she didn't say - if so, then can her family help. It just seems totally crazy

Cheapest 1/3rd of houses in the local authority maybe seems fair? What measure do you suggest?

None at all, because the home you live in should not be classed as an asset when it comes to means testing.

why not? We tax incomes and we tax assets such as savings, shares and housing. Why are assets just disregarded when it comes to benefits and not tax?

Can you not see the consequences of classing the home someone lives in as an asset?
A UC claimant who owns their home would no longer be able to afford to live. You can not eat bricks.

You can’t eat bricks, but you can borrow against them.

It should not be that someone with (eg) £150k in assets should be able to live off the state. The state should be there as a last resort.
When it comes to care home fees, the council will sell the house to pay for the care. So what’s the difference?
Maybe a max of 2 years UC before needing to ‘release equity’ or maybe UC needs to be paid back when the claimant is on their feet again.

I’m not persuaded that viewing a home as an asset for UC is great, values rise and fall, as do interest rates and to view the lowest valued third as eligible depends on accurate valuations. In a bear market a house could easily take more than two years to sell.

Something I’ve always thought would be helpful is for every person, possibly linked to something like an NI or identity number, to have a balance sheet “passport” where costs: benefits, education, health, etc, are loaded alongside tax and ni payments.

Classing your house as an asset for benefits would mean many people selling their house and ending up on the streets. They wouldn’t be able to just buy another house, on the basis there will be a reason they are in the mess to begin with - like unemployed or illness. Renting would also be difficult on the same basis.

They will then all be queueing at their local council after social housing/temp housing. Assuming a lot of these people will be families with kids or older people with various care needs - that can only lead to disaster.

Equity release will just cost the families more and more - someone posted the repayment charges earlier up the thread - they are excessive!It is an area that I think needs an overhaul - not as bad as pay day loans, but the sums are eye watering.

@PullingOutHair123 ”Equity release will just cost the families more and more - someone posted the repayment charges earlier up the thread - they are excessive!It is an area that I think needs an overhaul - not as bad as pay day loans, but the sums are eye watering.”

That’s because the interest payments are compounding. It’s not excessive.

There is an alternative where you don’t pay back the debt, but you do repay the interest on a monthly basis.

There’s an opportunity here. There are always going to be elderly people. Build accessible, affordable accommodation for older people to rent, with security of tenure. It would suit people like DH and me, we would use our only asset, our home, to fund our remaining years. No need for benefits, saving taxpayers money, and we’d free up a modest family home for first or second time buyers. All the houses sold recently in our street have been bought by young couples in ordinary jobs.

We would gladly move into a retirement flat, but we can’t afford to buy one; and at eighty, we don’t want to risk the insecurity of private rental. Research has proved that suitable accommodation in later life delays or prevents the need for a care home, and it cuts down bed blocking in hospital. That's mainly due to being unable to discharge patients into unsuitable housing.

Of course it’s compounding. Giving it a name doesn’t make it ethical. It just gives the family a spiralling debt.

If they need the money and have an asset to borrow against how is it unethical?

Is it not more unethical to take the money off the state because they don’t want to pay themselves when they have access to money? Isn’t that what scroungers are?

Because of the spiral. They are borrowing money in a way that is extortionate. Yes, call it compounding, but it is a very expensive way of securing money.

if you are 85 (and without writing all 85yr olds off) drawing down on the house to pay for care in your final few years is probably a valid option if needed. You aren’t going to get any other type of loan. Your beneficiaries won’t inherit so much - but that’s fine. The interest incurred will come off the asset.

if you are 45, with a family, you will never be able to get on top of the level of repayments required to pay back that equity release. It would be near impossible. For most, the mortgage is already a huge percentage of your outgoings. You would never be able to double that. Means testing would prove they couldn’t afford it. You would need to sell, and you would maybe still be paying off the debt after that due to how quickly that debt can spiral and how long it takes to sell. You will never be able to buy again, and now queuing for council support and benefits to house your family. Now there is another family in social housing, on benefits, adding to the benefits bill long term.

Help them earlier, help them through the rough patch whilst unemployed or fighting illness, then they are back on their feet and not reliant on state help for the foreseeable.

I dont really know how it works. But if you have a mortgage on which there are strict lending criteria, im not sure you could do equity release with compounding interest on the bit of equity that happens through inflation- surely the mortgage company wod say no because if the asset has to be sold they want to be paid. You'd end up with two competing charges.

Correct you can't do equity release, but subject to the value of the property and your ability to make the payment, you can extend your existing mortgage. In answer to another poster, equity release is not available to people who are 45 and certainly not to anybody with an existing mortgage. This is a thread about pensioners and why an example chosen by the press is not quite what is seems, rather than discussing the pro's and con's of equity release, we should be talking about shoddy, badly researched journalism, that seems to have cut and pasted without checking any facts.

You can’t do ‘traditional’ equity release while you have a mortgage.
In that case you could only try and increase the mortgage a bit as a stop gap, which is difficult/impossible if you don’t have the income to support it.

However here any social assistance above JSA can be held as a charge against the house to be repaid at a future date.

Current government borrowing is £15,000,000 per HOUR!
Unless taxes rise, people with the ability to support themselves need to support themselves.

There is no such thing as equity release for anyone under 55 or anyone with an existing mortgage so this is a completely fictional scenario. And you don't even have to make repayments.

The PP was saying anyone with a house should not get benefits, they should pull down on equity release.

This is a reason why it is indeed a fictional scenario, and why PP suggestion makes no sense.

If she does that she won’t be able to sell the house to pay for a care home if she needs one.

I imagine the calls for older people to release the equity in their homes is - as is usual with threads like this one - driven by envy and spite.
For some reason which I cannot fathom, people at the beginning/middle of their mortgages seem to think they are somehow disadvantaged because they haven't acquired the equity people much further down the line have.
It shouldn't come as any surprise to anyone that a house bought two years ago that it has not increased in value at the same rate as a house bought 50 years ago, but it seems to be driving ridiculous bad feeling towards pensioners.
To all those griping about the value of pensioners' houses: If you are paying off a mortgage now, the overwhelming likelihood is that your house will increase in value over your lifetime.
The years of raising children are the most expensive years of your life - there is nothing unique about struggling as a young family, and before another urban myth is trotted out, it has not been commonplace to have just one breadwinner in a family for decade now.
The truth is, every generation has its struggles. Young families now are finding housing difficult. My generation found it easier to buy a house, but struggled with very high interest rates and negative equity.
Stop being so entitled and accept the old person living in a house worth much more than they paid for it WILL be you one day. I only hope that your children are kinder to you.

@Katypp spot on.

I don't think anyone is being spiteful and people are, of course, entitled to keep any assets they have acquired legally over their lives - however just don't come whining about poverty or seeking state support if you cannot afford to maintain or run that asset and refuse to draw on it or liquidate it.

So should everyone claiming UC have to sell their house as it's an asset?

We are talking about pensioners.

All pensioners are in England. In Scotland, everyone is.

What’s the difference between them and anyone else?