Equity release?

[Sometimesitsmyownfault]

Or a lifetime mortgage, or similar?

I'm thinking of doing it and can't seem to find a downside apart from the early redemption fee.

Has anyone been disadvantaged by taking some of their equity. I have no kids or dependents so no worries about leaving an inheritance. I'm mid-fifties and want to have fun while I'm young.

Mid-fifties is awfully young to enter equity release contract unless you have a shortened life expectancy. Have you got other assets/arrangements to provide adequate income in retirement? The problem with releasing some equity now is that the interest that will rack up against it may be so much that it ends up preventing you from releasing any more equity at a later date, when you might need it for care needs or whatever.

Agree that mid fiftys is too young. The equity released will be low and the interest will rack up. I personally wouldn't consider this until 65 at the earliest.

What sort of fun do you have in mind? I'm the same age and funded travelling last year by renting out my house. I live alone so not a problem. Work held my job open as it was so quiet at the time.

Can you sell your house and downsize or move to where houses are cheaper. Or rent out a room, you can earn up to a certain amount without paying tax on the income.

I would pay it back after 5 years. I have no mortgage and the house is worth a lot. I'd be able to take out £300k

Meant to add, just wasn't quite ready to sell & downsize as I like where I live & I Airbnb it anyway when I'm not there.

So would you not qualify for a "normal" mortgage if you know how you're going to be able to repay in full in five year's time? Surely you'd get a lower interest rate than with an equity release plan? Your age isn't against you for a 5 or 10 year loan.

No, I probably wouldn't. And then I would have to make monthly repayments, and if I didn't do that my home would be at risk.

How would you pay it back in 5 years? By selling the house? Why take so much money? £300K?

I have quite a few hobbies and I want to enjoy them to the max while I am young enough. They aren't particularly inexpensive either.
I just wondered what the downside could be? I can scrimp along for another year, then an endowment matures and that will be great or, do it all now while I am in reasonable health (well, major op pending)..
Just to add, I'm not financially naive - I have a City background, have run my own businesses I later life. I just think I must be missing something as I can't find a downside so I wanted to hear from people who had done it. I did NC for this also!

How would you repay after 5 years? If you did interest roll-up (where you don’t make a payment) your paying interest on interest. If you went for a plan with defined early repayment charges the interest rate on the borrowing tends to be higher. If you went for a variable ERC then the majority are linked to gilt rates (usually the 15 year Uk Index) and the ERC can be as much as 25% of the amount owing.

50s is quite young to have equity release and the amount you can release is based on age, medical conditions and property value. The younger you are the less percentage of the property you can raise.

If you are still considering it, I suggest you look at independent brokers that can look at the whole of the market to get the best plan for you, so Key retirement, AskERIC, Age Partnership etc.

If you want to take out £300k over 5 years then repay it, either you must have a great deal of savings, or be earning loads of money. At your age a lot can happen in 5 years that might prevent you from paying it back. I would just downsize and use the equity from that to have fun. Then you've got a home to spend your retirement in.

Isn’t the obvious downside that you’ll have £300k less in retirement & have to sell your house in 5 years (I assume that’s the plan)?

What income/investments/plan do you have for retirement?

It's because I don't have a great deal of savings or earn a huge amount that I am interested in equity release. I have an amazing house that earns me money so I don't want to sell it yet. The income (even after tax) far exceeds the outgoings. I would be a mentalist to take a loan against it and add to my outgoings making monthly repayments.

I'll be ready to sell in 5 years, Brexit will be settled one way or another. If it is a fuck up, then I just won't sell, I'll keep it. Rent it out, turn it into flats, develop the land etc.

In the meantime I can enjoy my life to the max. It looks so straight forward I think I must be missing something.

I've done the figures, a reduced ERP means I'll pay slightly higher interest for the duration. I have to say that 5.5% and no repayments looks very reasonable - bearing in mind at one stage I was paying 15.4% on my mortgage....

If it is a fuck up, then I just won't sell, I'll keep it. Rent it out, turn it into flats, develop the land etc.

If you rent it out, you’ll need to live somewhere. Will you be able to buy or rent somewhere else for retirement?

If you turn it into flats, or develop the land, where will the capital investment come from for this, if you can’t raise against the property?

What will your income in retirement be?

You can’t see any downsides but I can’t see any upsides so there must be something we’re both missing!

CP The house is my pension really. I always have planned to downsize. I could sell now, buy some smaller houses and pay masses of Stamp Duty and then pay CGT as I sell them I suppose.

I would have 300k + interest + fees LESS when I sell, yes I see that - but I would spend some money adding value to the house, some on assets (although depreciating) and when I sold, I would still have enough to downsize with and invest.

The income (even after tax) far exceeds the outgoings. I would be a mentalist to take a loan against it and add to my outgoings making monthly repayments.

If the income far exceeds the outgoings, I think you’d be better off with a loan or mortgage, surely? You can afford to repay it, it seems, and the situation would be the same in 5 years but with less capital to repay.

You've already quoted my answer to your question. I am house rich & cash poor - relative.

Compounding that interest for 5 years - you'd owe nearly 400k back plus the ERC. As you are relatively young (very young for ER) you will be limited in how many providers your adviser could recommend. All reputable providers insist you have advice, I suspect most advisers would tell you not to do this.
If you don't have the savings now how will you pay the debt in 5 years? You could sell the house but what if as you point out you can't sell? Your ER provider won't allow you to rent it out - you have to live in the property and you won't be allowed to develop it.

And regarding the development - I have been approached already by developers who would carry out the project and offered a variety of options.
I would rather just keep that as a worst case scenario if I couldn't sell in 5 years or 8 years or whatever.

Are you planning a development as an alternative to ER? You won't be able to develop the property if you have an ER mortgage, the provider will not permit it, you'd need to repay the mortgage before embarking on the work.

If the house is your pension, you’re spending it in your 50s.

Up to you, but doesn’t sound like a great idea to me, that’s all.

Not true about renting it out - some do allow ASTs.

I'm taking into account selling fees, buying fees, moving hassle, to move would cost about £50k. Then I wouldn't have the benefit of the sum released increasing in line with the property market. That £300k would just reduce and my 'new' property would increase less as there would be less in the market to do so?
Borrowing money always has a cost, I'm prepared for that - I'm just trying to work out how much it is worth it to me, with my interests, at my stage in life. I won't be able to do the same things when I'm 65. I'll want to, but I won't be able to - not to the same degree. So there is a cost to taking the money now, but rather than just an increased financial cost, are there other downsides?

Redevelopment is not the issue really - ER would be repaid before, but too many details to go into as that is not the issue.

Has anyone done ER in the last 5 years or so & regretted it? If so, why?

How much is the property worth now, in its current condition?