WWYD? Equity Release for Extension

[petuniasandpetals]

We are nearing the end of our mortgage (owe about 40k) and are both approaching 60.
I'm retired and OH works FT (self employed) . We have a lot of equity in the house but no ready cash and are toying with the idea of a much longed for kitchen/diner extension which will definitely add value to the house.
We have both worked hard: kids through uni and on their own two feet and parents taken care of.
It seems like a no brainer but am I missing something?

I wouldn't say 40k is near end of mortgage, but I guess it depends how big your original mortgage was.

Equity release, it doesn't get a good press on here normally. I think it tends to be quite expensive in the respect that the amount of money you get is often quite low in relation to the amount of equity in your house you have to give up. I intend to equity release at some point in my life, but I think you need special circumstances in order to do it, and I certainly wouldn't do it until I was really old because the older you get the better the value. Also the idea that you are releasing money because it is locked up in the house and you don't have enough liquidity, only to re lock it in the house again in the form of an extension makes me scratch my head a bit !

Have you looked into alternative options like a secured loan or downsizing, the terms might be simpler and the cost less and give you more repayment options.

@GasPanic
Thanks for your thoughts. What I meant by liquidity (sorry I'm not great with financial terminology) is that we are comfortable but don't want to take on any debt at our age.
We have about 600k in the house and enough in savings to repay the mortgage if we needed to.
We have lived here since the family were young and now they return with partners/kids and wider family also visit
The garden is large and the kitchen small. We can't get anything we like in this area (semi rural conservation area which has its own issues) -
Just thinking aloud and agree I've heard bad things about equity release so I don't want to make a major mistake.

Ps. I shall find out what a secured loan is!

Absolutely don't do equity release, you're so young the company will own the entire house by the time you die. It is possibly the worst thing you could do.

You are far too young for equity release.
Look into other ways to fund to kitchen.

Surely you are looking to increase your mortgage rather than a true "equity release"?

If you have enough in savings to repay the mortgage use that and have a loan. I would not consider equity release at your age.

Do you hate your children and want to disinherit them for a kitchen?

You say you don't want to take on debt, but that's what equity release is. At approaching 60, you would have so many years of building up interest on anything you borrow. You need to pay it back if you sell, wo if you were to need to downsize or move later, your pot would be greatly reduced.

A small mortgage would be a much cheaper way to do it over all. If your husband has a good enough mortgage, he could take the tax free cash lump sum to pay for it. If your health is well, you could also consider taking on a part time job. There are lots of options to look at before equity release.

Do you have an option of knocking the existing kitchen through to a reception room to make a larger kitchen/diner rather than an extension? It would be a lot cheaper?

Do not do it. They will end up owning the entire house due to the interest accruing.

Hell no! DON'T! Don't! Don't!

Definitely better off extending your mortgage by, say, 5 years, using savings for the extension and then repaying mortgage with help of lump sum from pension on retirement (if partner has one) or getting small job (talking, say £100-150/week territory). Equity release would be madness if you like your kids!

I think the OP means they want to remortgage to release some equity, rather than hand her property over to an equity release company.

Would you getting a part time job for a few more years be an option? You said you e retired, partner working full time. Would you consider working until 65 in order to fund the work you're wanting done?

If you do equity release at your age to add value to your house all that means is that the equity release company will get a better house when you die as by that time they will own most of it . Move to somewhere you can get some cash out of your house .

Actually, ignore my above comment, I don't think that is what the OP means!

I wouldn't. I'm assuming the interest is huge.

Equity release will not be your friend if in say ten years time you need to downsize for health or mobility reasons, or because one of you has died. Sorry to sound so negative, but you need to be realistic before you practically give away an asset you have spent your working life building. Take out an extended mortgage or other loan, build your extension and enjoy it. That way you retain ownership, and your equity, and are in a better position to alter your plans to suit your circumstances should they change, which I hope they don’t.

I think 2 things are getting confused here. Equity release is something different to when you remortgage and basically increase the mortgage to take some extra cash out the property.

Most people will take some cash out of the property to fund extensions etc, so if your current mortgage is £40k, remortgage to say £90k and you take £50k cash to do the building work

Tbh you are quite young to be retired. Can't you get a job and pay for the extension that way?

Don't do it

If you've got 40k in savings (enough to repay the mortgage) why not just use that to fund the extension instead ?

Don't release your equity through one of the equity release companies (look at money saving expert website for the reasons not to).

But speak to your mortgage lender about borrowing more money on your existing mortgage to fund the extension. IE borrow another 40K for the extension & pay it back to them as yiu cyrreblrt do. You can either extend your term or increase your payments.

However, if you have £40k savings, why don't you just use them?

I'm assuming 40k won't go far on an extension currently.

Lots of people here making wild statements about equity release that simply aren't true. Look up "lifetime mortgages" which are offered by perfectly reputable lenders. They aren't really all that different to any other kind of mortgage, similar interest rates - the main difference is that often you don't make payments as you go along, you just pay back when the house is sold (whether you are alive or dead) and so you pay the accrued interest as a lump sum. But there are lots of variations, on some you can pay interest as you go along, or make yearly payments on the balance. You are absolutely not signing the whole house away or destroying your kids inheritance, especially not if the money you take out is invested back into the property.

Thing to take from the replies you've had here is that there's a lot of misinformation out there, and there are a lot of things to consider when you chose exactly how you do it, so it's well worth doing a lot of research and speaking to a mortgage broker and/or financial planners to get all the information and advice you need.