Parents/Grandparents releasing equity

[rosehip]

Anyone had any experience good/bad.

In what context do you mean?

By them releasing equity in their property while living to help relatives financially. I understand the over 70's can do this up to 30% of current value of property.

It is possible to borrow money against the house, but you have to remember that not only does the loan come off the house when sold but also the rolled up interest which can be as high as 8%.

It is not meant solely to help relatives financially but to enable the owners of the property to have extra money to spend without selling the house. The more expensive the house the better, as there are cases where the loan incurred when the house is sold is more than the value of the house - which means the executors have to find the difference.

Some schemes will do this if one partner is 60. Companies specialising are Northern Rock, Norwich Union, Newcastle BS and Capital Bank. If you go to the BBC website and click on Moneybox they did a whole programme devoted to it.

My parents have just done this with Northern Rock and taken 15% of the equity of the house. They used Northern Rock on the advice of their solicitor. The interest rate on the loan is capped and they can repay whenever they want (eg: if they move to a smaller house) with no penalty.
The loan is then paid off if still outstanding as part of the estate when the second partner dies.
My parents are both in their late sixties and can go back for a furhter loan if they want.
I was sceptical at first but went through it with the Northern Rock representative and it all seems ok.
Hope this helps

I know this is an old thread, but I have been dying to ask this question somewhere.

Say an elderly couple want to release equity in their house. They sell the house to their adult children, promising to pay a rent that is at least equal to the mortgage, and the mortgage needs to be for as long as possible. The old folks then get a lump sum to live on, probably supplemental to some other income. They will probably (if they have good relations with their kids) be able to to live in the house until death or they need to go into care.

Somebody tell me what's wrong with this plan...

• Old folks have to trust their children.
• The children might not be able to get a deposit together to buy in the first place.
• It would still have costs (like Stamp Duty, Capital Gains Tax). But I think it would work out far cheaper than any of the commercially available equity release schemes.
• If the old folks live a very long time, especially if they go past the mortgage length -- they might have no savings left. The mortgage might still need to be paid but no funds would be around to pay it, unless the children had some savings to cover it. But the parents could agree to let the house be sold at this point. And the old folks would get a lot more cash up front, while the children would get a lot more inheritance in the long run.

So... why don't any of the financial gurus ever mention this option?

Could be risky if the parents needed a nursing home. Costs may have to come from house if a recent sale.

It would work if the children have the funds, but it wouldn't save on inheritance tax. The parents would be deemedto have a lifetime interest in the property so IR woudl still count as part of their estate