Equity Release

[moltopianissimo]

Can anyone give me some (very general) info about equity release, please?

I basically want to know broadly how much, proportionally, will be left in the pot after fees and interest. Obviously, as I said, I'm only expecting very rough figures.

Also are there any other similar schemes I may not be aware of?

Basically I don't have a great pension, but I do have quite a lot of equity in my property and would like to use it in my old age. I'm 50 at the moment.

Too many variables and not enough information given.

at an interest rate of 7%, the debt doubles approx every 10 years - so if you live until 80 after taking it out at 50 (not sure you even can take it out this young), your debt would be 8x your loan. Plus fees etc.

you can use the rule of 72 with the exact interest rate https://www.investopedia.com/terms/r/ruleof72.asp

Do you realise that equity release is effectively a lifetime mortgage? The money released will be tax free, but having it could affect access to state benefits later on.

Compound interest is the biggest drawback. You don't sound like you would have the resources to make repayments and this means the sum owed would grow substantially over time.
For example, if you borrow £100k at 6.5%, after 10 years you would owe £188k
20 years - c.£352k
25 years - >£480k
etc

You could also take the maximum allowed, just let the loan rack up as there is a no negative equity guarantee now, and die with zero/little assets.

You can try using AI to assess its suitability for you.
Give your age
the approximate value of your home
whether are mortgage free
how much cash you want to release
whether leaving an inheritance is important

Or you could downsize to release the equity in your house.

It depends on whether you want to pass on any money as inheritance. The interest rates are high and can quickly eat up any capital. However it is a way to access money but continue to live in your home.

I’m 60 and approaching retirement so work set up a mini financial advice session.

A version of Equity release came up, as a way of releasing money to help adult children eg with house deposits or going travelling etc and also reducing inheritance tax as the value of the house has a debt against it.

It's more expensive the younger you are when you start taking it because of compound interest. Of course that depends on the great unknown of how long you live. It literally could be any figure between all the equity you have before you take the mortgage and zero if you live a long time and interest eats it all up. No-one can say any more than that.

You say you have a lot of equity. Will there be any scope for downsizing/moving to a cheaper area and living off the released funds? That way, your money will earn you interest or investment growth rather than it costing you money. In a smaller property the bills could also be lower, meaning you need less money to live on.

If you don’t have anyone you want to leave anything to then equity release can be a way of financing retirement. There is a book called Die with Zero you may find interesting.

Would downsizing be an option for you?
Do you have DC?
The younger you take ER, the lower the % of the value you can take.
The amount of the loan vs equity remaining at death will depend on the time elapsed between taking the cash and death. It could be zero.
There are a LOT of restrictions on the property to be eligible for an ER loan.

Thanks - I'll look into that.

Thanks for people's thoughts. Bit more info:

Rough equity = £500K;
No DC;
Would rather not downsize (it's only a two bed flat anyway);
Not thinking of doing it yet - perhaps at 75/80.

My grandmother did it and when she passed away it was an absolute nightmare