Equity release

imported_iain · 3 December 2004 at 5:11PM

Has anyone any information on Equity release ? I enquired a couple of years ago about a scheme and the compound interest was horrendous.please help.

margaretclare · 3 December 2004 at 5:44PM

Hi Iain

Have a look on the SHIP site (safe home equity plans).

We released 25% of the equity a year ago - valuation was £140K and releasing the 25% of the valuation enabled us to pay off the existing mortgage, thereby freeing up £265 a month. If we hadn't done this we'd still have been paying a mortgage until we're 83.

We borrowed 25% of the equity from Northern Rock via Legal & General, all negotiated for us by a very helpful IFA. The interest rate rises with the Bank Rate, but it will never rise above 7.5% no matter what the BoE does. Interest rolls-up in our lifetime, to be paid off after the death of the second survivor. We also took the opportunity to get the deeds put into joint names following our marriage 2 years ago - they were in my name alone up to then.

We were allowed to borrow 25% because we were over 67 then - if we'd been older we could have borrowed more, but there wouldn't have been much point in borrowing more - all we wanted was to be rid of the mortgage payment.

HTH

Margaret

payless · 3 December 2004 at 6:02PM

fees are fairly high, and the interest if rolled up
( compound) does soon add up

suppose might suit some people

Robert_Sterling_3 · 3 December 2004 at 8:13PM

suppose might suit some people

It seems to suit Margaretclaire

margaretclare · 3 December 2004 at 9:13PM

suppose might suit some people

It seems to suit Margaretclare

Yes it does. Because we're free of the mortgage payment, and we could think of lots of other things to do with the £265 a month.

There is still equity left in this property i.e. 75% of £140K, and while the interest rolls-up, this doesn't bother us because we will never be called upon to pay it back. There's also the possibility that the remaining £105K will increase in value, even though house-prices may not rise any further, may fall in fact, but we think that there was an increase in value after that valuation was done in June 2003.

We looked at it all very carefully, and decided that it was a way we wanted to go.

The kind of people it would not suit are those who are desperate to leave their assets to their kids/grandkids. We're not worried about that. Our kids (2 of his, one of mine) are doing very well indeed thank you. Anything left from the estate of the final survivor is to be split between 5 grandkids, 3 of mine and 2 of his.

It's something not to be taken lightly, to be thought about very carefully, but it's an option worth considering. We didn't do it because we needed money in our hands, but we thought 'Better than going on paying a mortgage for another 15 years. £265 a month can be put to much more pleasant uses'.

Margaret

Martinslovechild · 3 December 2004 at 11:03PM

Margaret,

Don't get too wound up by Robert Shilling. He's well known at upsetting people.

Ignore him.

margaretclare · 4 December 2004 at 12:18PM

Margaret,

Don't get too wound up by Robert Shilling. He's well known at upsetting people.

Ignore him.

Thanks, MLC.

Margaret

Robert_Sterling_3 · 4 December 2004 at 1:23PM

??? ??? ??? ??? ???

I am confused.

Payless pointed out for the benefit of the original poster that the cost of equity release was high.
He was indicating that it does not suit everybody.

Margaretclare kindly related her own experience of equity release and so far it has suited her admirably.

I merely indicated that Margaretclare was an example of somebody who was well satisfied with equity release.

MLC interjects a complete, and offensive, non sequitor.

Margaretclaire is told "not to get too wound up".
Margaretclaire seemed not to be wound up in the slightest. She merely offered further clarification of why Equity release did suit her and would not suit other persons whose situation was different from her own.
She pointed out that the deal perfectly satisfied her. She made no observation one way or the other on whether it was expensive or not.

Have a nice day MLC

margaretclare · 4 December 2004 at 4:43PM

Hi all

No, I didn't get wound up.

I'm not an expert in these matters, but sometimes one's personal experience can be of help to others. What they make of it is entirely down to them.

I wouldn't know whether this exercise has been 'expensive' or not. I guess the longer we live, the more the interest will roll-up, to be paid off when the property is eventually sold (i.e. when neither of us is around to need it, and therefore neither of us will care one way or t'other!)

It has certainly suited us, and has given us a lot more flexibility in the way we use our money. But everyone's circumstances are different, it's a complicated area, and therefore I would advise anyone (a) to look at the SHIP website and (b) consult an IFA before making any definite decision.

Best wishes

Margaret

Robert_Sterling_3 · 4 December 2004 at 5:41PM

Thank you very much for explaining your position so clearly. HPD

nh · 4 December 2004 at 6:46PM

It seems to be entirely the right thing to do for you Margaretclare.

You can't take it with you.

It is probably the only time when it is right to make a 'bad' financial decision ie. to borrow money at quite a high interest rate and then just letting the interest build and never paying it off.

It is better to be £265pm better off now, rather than £50k (or whatever) better off when you are dead!

And I suppose house prices only need to rise by a few per cent per year to cancel out the interest rate you are paying on 25% of the property's value?

Equity release

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