Equity release...

[Miljah]

Is this a really stupid idea?

House is worth £175k, near Salisbury. The plan is to release £19k, which will actually yield £17k, at a fixed 2.8%.

Really not sure how ER works!

Is this an idiot's game?

The owner owns it outright, is single, 58, £11 an hour job, no pension, no dependents, wants the cash to do some work on the house (already overcapitalised, IMO!), the rest for boys toys. Has got form for champagne tastes on lager income.....

Can anyone shed any light on the pros and cons?

Thanks.

Equity release at 58 is likely to be very expensive. Is it the kind that no payments are made until the occupant dies, goes into a care home or sells the property?

However, if he is single with no dependents, then he might not care about losing some/all the value and would prefer to use the value to enjoy the rest of his life. However, what if next year he met a younger spouse who'd possibly even want children? He could come to regret giving up his security.

I do fear that £17k on 'work on the house and boys toys' would go very quickly and he'd possibly be wanting another loan later on.

No chance of downsizing and living off the equity that way? Then he'd earn a bit of interest instead of paying it and the money would last longer.

He also needs to think about retirement - does he have a full state pension? Is he likely to be able to do his job beyond pension age if he needs more money?

Why not get a bank loan ?
Apply via his current account
It should state interest & how much to pay per month

Or if has spare room, rent out tax free up to about 7k per year, the exact amount is on www.gov.uk

A bank loan will need monthly payments and I'm surprised he can afford a loan that size on a relatively small salary.

He could rent out his property & live somewhere cheaper. But he would need to pay tax on the income.

Or rent out his loft, driveway, garden separately

Horrendous idea.

There will be a huge scandal in years to come about equity release, like endowment mortgages.

These things are shockingly bad ideas. FIL looked at it a few years ago and asked me to look at paperwork as I'm quite financially savvy and I told him to avoid it like the plague.

Living mortgage free he can afford a bank loan. £11 an hour is not that bad.

Or he can save. He's being lazy to not want to save or pay a monthly amount back.

Equity release can work well for someone with no dependants.

I predict that the £17k will all be frittered on ‘boys toys’ and he’ll have nothing to show for it.