Equity release or lifetime mortgages anyone?

[ajandjjmum]

Friends of ours have just hit 70, and are reviewing their future finances. They have no children, limited investments and like many people, their main asset is their home.

They have spoken to a number of people, and are getting rather confused with the advice. DH has looked at the paperwork, and it seems that to draw £50,000 from the value of their home on a lifetime mortage (which lasts 18 years, so to me is a contradiction in terms!), would cost around £160,000.

Any advice/experience on realising capital - which will make the difference between them enjoying life and scrapping by - would be much appreciated.

I have no experience of the figures but remember a solicitor friend saying never EVER do this scheme, you would be better to sell the house to live off the equity and then pay rent on a house. Think it was something like release 50K to a house worh 250K. Have a look at Martin money man site, there will be loads of info there.

Agree with carrie - these are probably going to be subject of the next mis-selling scandal.

I know you are so right - and those figures add up. The difficulty is that their home is their pride and joy, and they wouldn't want to sell and live in rented accommodation, with all of the risks that entails, although it would give them the funds to live very comfortably.

I think the rules have been tightened because of mis-selling already!

I'll have a look at the Martin money man site - thanks both.

I just want them to enjoy what they've worked for, rather than scrimp to live and die leaving a huge sum in their property.

Could they downsize to release the money Lifetime mortgages are a rip off and when one partner dies it can be a nightmare for the other to sort out,There was a scandal with these at barclays a few years ago when at the end of the term not only did the bank own everything the people also owed them!

I think that might possibly be the way to go noddy. Just spend what they have at the moment, and then look at down-sizing in 2/3 years or so.

Thanks.

Have a look at these guys www.keyrs.co.uk/ I used them for my mother who had little income but a reasonable sized house.
This area is very heavily regulated now by the FSA and you cannot get away with mis selling. Most people now tend to use the drawdown facility which means you only take what you need from the property. This reduces the interest you would pay on the amount borrowed.

The industry is much more tightly regulated than it was a decade or two ago, but there's no getting around the fact that these guys make their money by giving you less money than the property is worth.

Saying that, it can be the right situation for some people, particularly those with short life expectency (so the interest won't have too much time to build up). Important to make sure that the paperwork regarding the death of one half of the partnership is clear and unambiguous too.

FWIW after working in financial services and dealing with (reputable) equity release companies on a monthly basis and getting fairly at home with the process, I would only use equity release as a last, rather than a first, resort.

Just done a search for equity release, and up came this thread I started eight years ago - scary!!

Situation is still the same except that my friends are now in their late 70s. Just returned from a cruise , where they had a great time. If they had an extra £10K a year, it would make a huge difference to their lives - it seems that drawdown might be the right way to do this.

Would be grateful for anyone's experience or updated thoughts on this situation - having no immediate family, it seems sad that they scrimp and save when some equity from their home would make so much difference to what they could do.

They categorically do not want to downsize.

Thank you for any thoughts.

I work in financial services and have seen an increase in people using equity release in just the situation your friends are in. It might not make the most "financial sense" and obviously will affect inheritance but if you don't want to move and especially if you have no children it can be the right thing.
Find an adviser that can sit down and talk it through in detail- family and friends might be able to recommend one?

Thank you VacantExpression - that is exactly it! My DC are likely to benefit from any inheritance and I really want to encourage my friends to enjoy what they have earned - but in the most sensible way.

I'll ask around for recommendations!

As they are now late 70's the money that will be released will be a lot more than 10 years ago. Your friends sound like the ideal people who would benefit from Equity release ie want to stay in own home and no DC to leave any inheritance to.

Why struggle with money when you have plenty tied up in your home!

Equity release will only suit a very small percentage of people but it would appear your friends fall within that category.

I think so too

They do rely on me for things though, and because it's something I've never dealt with, I'm concerned about recommending anyone. Perhaps our own Financial Advisor might be able to point me in the right direction.

If anyone has had any experience themselves, I'd be grateful to hear the good, bad and ugly!

My in laws went with Aviva. They are a reputable company. But I would recommend seeking the advices of a financial adviser to seek the best possible deals.