equity release

Linton wrote: »

So you are 61 and have £50k of debts and £120k equity. Looking at one of the main provider's website it would seem that the maximum amount you could get for equity release rolling up the nterest into the mortgage is 20% of the value of the house.

A quick bit of arithmetic shows that no matter what the value of the house this could never get you enough money to pay off your debts and your mortgage......

What I'm puzzled about is the ex's interest in the home. The OP says they want to do equity release, but what does the ex have to say about it? Surely they need to approve and would then also get part of the equity release further reducing the money the OP gets.

If the OP sells and the sale nets 120k and then half goes to the ex then they have 60k which will pay off all the debts and leave 10k for a fresh start.

Linton wrote: »

True, but I cant see being homeless at 61 with only £10K to your name as a very enticing prospect.

That's true, but the OP could rent. They mentioned 20k income and the 10k would be an emergency fund. Certainly there would need to be some acceptance of change and budgeting, but 20k income, no debt and 10k in the bank is a situation that some would envy. I understand that it is difficult to go from a home owner to a renter, but maybe the OP needs to do that to get rid of the debt that seems to be a big worry.

I just don't see how the OP can take out something like a lifetime mortgage and probably wipe out all equity in the house when the ex still has some interest in the home and gets some money on a sale.

I suggest you dont start off with the comparison companies. Much better for you to find an independent mortgage advisor/IFA who you are happy to work with. The advisor should understand your situation and then discuss the options, benefits and risks with you. If you want to go ahead he/she will be able to choose the best deal available that match your needs.

Malthusian wrote: »

.......
Equity release is not about spending your own money vs giving it to the next generation, it's about spending your own money and giving 3-5x your own money to an insurance company.

The question of 3-5 times is a matter of optimising the time when you do equity release. One can conceive of circumstances (unmanageable high interest debts perhaps) when early equity release may be the best way forward but if it's for your own use then a rational person would compare the possibility of say 25% at 60 with 50% of presumably a much higher value at 80 (numbers taken from the Aviva calculator), or something in between. Planning to take Equity Release later would enable you to drawdown a pension pot faster than would otherwise be prudent.

If you dont use equity release of any form then when you die you leave behind a small fortune. You may love your relations, but surely you could reasonably consider that donating a pot of say £300K when you've spent the previous 20 years living on £20K/year may be a little OTT.

Another point to consider is that of course you dont have to take out the maximum. In the example of £20K spent on bingo rising to £72K, there could easily have been perhaps £200K left for the relatives.

Linton wrote: »

The question of 3-5 times is a matter of optimising the time when you do equity release. One can conceive of circumstances (unmanageable high interest debts perhaps) when early equity release may be the best way forward but if it's for your own use then a rational person would compare the possibility of say 25% at 60 with 50% of presumably a much higher value at 80 (numbers taken from the Aviva calculator), or something in between.

If they're still doing such calculations in their 80s and they're planning to stay in their own home, then they're probably planning for their 90s and beyond. So the cost of equity release will still be prohibitive. Unless, of course, they have no heirs, no favourite charities and no reason to care about who gets the house.

If living into their 90s seems unlikely, then care needs will be uppermost in their mind, which means equity release is unlikely to be appropriate given how it will restrict their options.

Most people in their 80s for whom equity release was a good idea will have already done it.

If you dont use equity release of any form then when you die you leave behind a small fortune. You may love your relations, but surely you could reasonably consider that donating a pot of say £300K when you've spent the previous 20 years living on £20K/year may be a little OTT.

£20k / year sounds like a good living to me. What would I do with a £150k lump sum having been accustomed to £20k a year? Buy the ever-popular Lamborghini? In my 80s? Go from my poverty-stricken existence on £20k a year to the jet-set lifestyle of £26k a year? Whoop de do.

Another point to consider is that of course you dont have to take out the maximum. In the example of £20K spent on bingo rising to £72K, there could easily have been perhaps £200K left for the relatives.

"You can draw on the capital flexibly" is like "you can pay the annual interest so it doesn't roll up and swallow the house". People only do those things in the brochure. In the real world of equity release everyone borrows the maximum and nobody pays the interest. Either you care about what happens to your money after you die or you don't; if the latter it makes no sense to take only some of the money available.

This has inevitably diverged from the point I took issue with. The idea that you should care about only yourself and should attach no value to leaving an inheritance (or making gifts in life) is as irrational as its opposite, that you should only care about your inheritance and should attach no value to your own needs.