Equity Release - Not Loan

Lovingitifitsabargain · 16 June 2005 at 11:17AM

If I have put this under wrong catagory then apologies - heres my question - does anyone know anything or a web site we can look up info on Equity Release - my mum wants to take out equity release but not a loan she heard that you can do this in a way that you get money on your property and the lenders name goes onto your deeds as part owner then when you pass away the property is sold and they get their money back that way - I am confused sounds too good to be true to me - she only bought this property 6 months ago - cash buy - she is now retired at 60 - and wants to do this for inheritance tax reasons if she dies (shes got years left in her as I keep telling her but she has a bee in her bonnet about this as she has just had to go through it all after the death of my nan and inheritance tax is a nasty business)
thanks

margaretclare · 16 June 2005 at 11:34AM

Hi

Your first stop has got to be the SHIP website (SHIP = safe home equity plans). https://www.ship-ltd.org

Be very careful. This has already been discussed on other threads. We did it 2 years ago just to pay off an existing mortgage which would have continued until we're 83. What we have now is a 'lifetime mortgage' on 25% of the equity and this will be paid off on the death of the second of us.

Your mum, at 60, is relatively a spring chicken (have you heard the saying that '60 is the new 40' i.e. people of 60 now have as much life in them as 40-year olds used to have?) Also she may be too young to get a good deal.

I'm not sure that IHT is a reason for doing it, but others will no doubt come in.

Aunty Margaret

lisyloo · 16 June 2005 at 1:18PM

It's not too good to be true, but I think you will be dissapointed when you look at the figures.
If I was givng you money to get the house in potentially 40 years time, then clearly I am not going to pay the full price for it (because I lose 40 years interest on my money).
Have a look by all means, but I can tell you for free that I'm certain you will be very dissapointed with what's offered. This is because of her age.

As regards IHT - she can pass on abut £265K without paying inheritance tax. Does she have more than this?

I don't think Inheritance tax is a good reason for doing this (in fact it gives her more money).
If she wants to avoid inheritance tax then I think there are better ways of doing it (and I'm sure there is a board that will help).

fatbelly · 17 June 2005 at 1:12AM

Age concern have some excellent factsheets on their website on issues concerning older people. For the one on raising income/capital from your home, click here

ReportInvestor · 17 June 2005 at 7:34AM

IHT free limit is currently 275K, rising to 300K in April 2007.

I agree with lisyloo that equity release might not be the best way forward & other avenues should be explored. I assume her thinking is to give away a large sum which will be free of IHT if she survives a further 7 years after the gift?

Does your mum like her new house, situation, neighbours? Is it the right place for her retirement?
Is it too big for her? (She could downsize to release capital - a bit of a shame if she's just moved given extra costs and stamp duty etc.) Many advisers suggest that you look at downsizing before you consider equity release.
Has your mum properly considered her own income needs for the next 40 years?

If she's in a state about her own mum's recent death then it might not be the best time to take such a substantial decision about her finances/future.

I'd take professional advice to consider all options before jumping into equity release.

margaretclare · 17 June 2005 at 8:01AM

Reporter wrote:

If she's in a state about her own mum's recent death then it might not be the best time to take such a substantial decision about her finances/future.

I'd take professional advice to consider all options before jumping into equity release.

Yes, I agree. Equity release isn't something to be 'jumped into'.

Downsizing wasn't an option for us - there's not much 'downsizing' you can do from a 2-bed bungalow. Sure, we could have moved to an ex-mining village in the Midlands or North, but we didn't want to. Sure, we could have gone on paying the mortgage until we were 83 but we didn't want to do that either. The extra £250 a month that we're not paying on the original mortgage can be put to better uses.

There's a long list of questions that we were asked before it could all be finalised - had we discussed with family, had we thought about the effects on benefits etc. Even so, we still own 75% of the equity and no mortgage to pay, we're not worried about IHT so we're quite happy about it all. But everyone will have their own personal circumstances to think about.

Aunty Margaret

Ecky-thump · 26 September 2005 at 9:37PM

Hello margaretclare, I am new here, having registered just for information about equity release and found the information very useful - however...

We need the dosh. Pure and simple. Not to spend recklessly, but to have an extension built onto our semi-detached house. Hubby and I, both 61 yoa, have looked at something called Surrenda-link. Do you know of this company?

They will buy up your endowment policy and give you what they think its worth, which is normally more than the surrender value. They keep paying the premiums until it matures and then they cash it in. In our case that will be 2.5 years from now.

We would get instant cash value for our policy and they make their dosh when it matures. We stop paying the mortgage straight away, saving £350 a month. The amount we would sacrifice for surrendering would be a couple of thousand pounds, which we will recoup by not paying the mortgage for the next 2.5 years!

Is it that simple, in our case? How does this favour with the equity release you have all been talking about?

herbiesjp · 27 September 2005 at 8:14AM

If you are looking to mitigate IHT, the you could potentially be looking at Wills and trusts as a way of doing this.

Ecky-thump · 27 September 2005 at 10:35AM

Ok herbiesjp, thanks, not worried about IHT or Wills and Trusts, just want the dosh!

Ecky-thump · 28 September 2005 at 11:01AM

We got a letter from the company, who we asked for a valuation of our policy, and they say they cannot buy it from us as we do not satisfy the purchasing requirement!! Cheek! We have done so, too!! Don't know what they mean, so will phone them today to find out! Very intriguing. Mmmmm...

jenniferone · 20 November 2005 at 12:13AM

can you get an equity release if you are on income support and the dss is paying your mortgage please

Equity Release - Not Loan

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