Equity Release Dummy - any tips?

[TooGlamToGiveADamnn]

My grandmother (75) is considering doing an equity release to loan family money for a deposit but doesn't understand the ins and outs and how it will effect her future regarding interest. We are due to speak with someone on Monday to go through figures.

Just wondered if anyone has done it and can give me an idea of how it went for them?

It is not a sensible thing to do, most of the value of the house will be eaten up by interest. It would be wise to see how care home costs, if needed, are affected by this. They may try to get money back from the people who were lent the money

It’s almost never a sensible idea. She should speak to an independent financial advisor.

Don’t do it, would be my advice. The interest rates are astronomical. We have just wound up MIL’s estate. She took out equity release for home improvements ten years ago. She ended up owing double what she borrowed, and 75% of the sale price of the property went to the equity release company.

TAKE ADVICE!
Go on to Martin Lewis website. Sure he must have some tips there where to get advice but seriously....you have to be super super careful. There are other cheaper ways of using the capital she has in the house to secure a loan.
Some equity release may be ok IF VERY LIMITED CIRCUMSTANCEs.

Age UK (charity) may give you some pointers too.

And just be careful who you are talking to on Monday. Talk to more than one person? Not all IFA's are equal. Some aren't great at tax planning or will planning, some are just better at flogging you stuff.

I know they are all supposed to be really well trained and all that....just telling you what I have seen in practice.

Don't. It's compound interest. I think they all have to have no negative equity guarantees now. With good reason.

It always made me sad dealing with them for clients (solicitor). I had to read them out a whole page of warnings, which we would both sign to say they had understood, but nobody ever changed their minds by that stage.

Just don't do it.

Is it you she is lending the deposit to?

Don’t do it!!

Yes, it was for me.
She wanted to take money out of her house to gift me as a house deposit.

This is maybe sounding like a bad idea.
We were going to speak to a few advisors before even just doing it.

True advisors or people who are trying to flog it to her.

My great aunt had done equity release for a relatively small sum. She was long lived, and it was 7x the original sum that was eventually paid

I think there's a place for it where the elderly person has a large asset but a poor income/standard of living but to gift to family members? No.

I think there could also be issues if she needed residential care, if she'd gifted away a large part of her assets.

Awful money making schemes

They take massive interest in the loans and they take fees and all sorts

You can end up with a huge debt

It’s also a nightmare if she ever wants to sell that house and buy elsewhere (for example a flat in sheltered accommodation) - the debt will come due and she might not be able to afford the accommodation she needs.

Yes uncle and aunt did an equity release and didn't tell anyone. When uncle died aunt wanted to move closer to her kids which they all assumed she would be able to because of market value of house only to find the equity release had taken so much she couldn't even afford a one bed flat nearby

@Talia99 makes a really good point about future planning - my MIL did look into moving to sheltered accommodation after her husband died but would have struggled to afford a one-bed after repayment of the loan.

If you have an elderly person who is living in a small (so they can’t downsize) house bought for peanuts 50 years ago but now worth millions and they can’t afford to have the heating on as well as buying food, equity release can be the least bad of the bad choices.

In my experience it can lead to massive family fights when it turns out the large inheritance doesn’t exist, particularly if the funds raised (which as stated may only be a tiny percentage of what has to be paid back when the house is sold) have all been spent on one member of the family.

Although a nice sentiment from your grandmother, please be responsible and don’t let her do it. If you’re sensible with your money you can save up for a deposit yourself.

Never do this. DHs aunt did and the interest was astronomic when she died and she hadn’t understood the interest details. Your grandmother could sell and downsize and gift money to you. That will attract IHT if she dies within 7 years. I’d cancel that appointment if she wants to maintain a property to leave to her whole family.

Can she re-mortgage or take out a loan?
Those are much cheaper ways of doing it.
I have to say though, you might have to just not buy a property if you can't afford it?
Won't the rest of the family be upset with you asking your Gm to go into debt to help you?