Equity release

ps2659

A friend of a friend lives in a mid terrace X council house that he owns outright he is short on cash 65 years old widowed and is considering equity release although he says he has been offered £20000 for it with no rent to pay for the rest of his life when he dies or goes into care the property will belong to the people who stumped up the £20000 is this a good deal for him.?
The market value is approx £95000

lynzpower

Does not seem like a good deal to me.

McKneff

no nor me either. These are just downrigt robbers - shame on them.
its good he's got a friend like you looking out for him

ps2659

anniehanlon wrote: »

no nor me either. These are just downrigt robbers - shame on them.
its good he's got a friend like you looking out for him

Its just a friend of a friend,I don't know if it is good deal or not with no rent to pay for the rest of your life guess it depends on how long he will live.

phil_b_2

Its not actually a bad offer.

If he lives another 15 years and would normally pay £450 rent the offer would be worth £101k. If he lives longer than that the value grows more.

Then consider how houses are currently dropping in value.

would the people buying it pay for maintenance too? Would make it better still.

If he were to take the offer just make sure you dont see these 'friends' paying regular visits to him with artery clogging foods and liver killing liquers as gifts!

lynzpower

would he really be paying 450k on a property worth £95. possible I suppose I dont know.

BobProperty

I've not seen or looked at any UK reversion rates for some time, but that strikes me as being on the low side. I'd guess at more like low £30s would be a reasonable rate but that is a guess.

phil_b_2

lynzpower wrote: »

would he really be paying 450k on a property worth £95. possible I suppose I dont know.

no doubt anyone paying 450K per month rent on a 95 quid house would be getting ripped big time! lol.

I'm paying £600 a month on a property I suspect is worth about £145-150k, and that is what I based it on. Who knows though. Perhaps a bit less than 450 then, but I doubt much.

The question regarding whether or not the property would be maintained by the new owners was quite an important one I thought.

ps2659

But is it a good deal £20000. cash and no rent for the rest of his life ?

phil_b_2

depends on how much local rent is in the area, how long he lives (unpredictable obviously) and whether or not he has anyone to leave the house to when eventually dies.

I assume thoroughly checked contracts would be drawn regarding the free rent situation. Lots of different situations would need to be covered.

abc

ps2659 wrote: »

But is it a good deal £20000. cash and no rent for the rest of his life ?

To me it looks like a very poor deal based on those figures. They would be giving up their home for a low amount their estate would get nothing on their death.Mortgage Express for example do an equity release mortgage which you make no repayments on (interest is rolled up and added to the loan), and there is no negative equity guarantee.At 65 I think they will lend up to 30% of the house value (which if the £95,000 figure is correct would be £28,500).As I undertand it when they die or go into a home etc the loan is to be repaid with the interest. If this is less than the value of the property there would be something to leave to the estate.However, if interest and the loan are more than the property value the "no negative equity guarantee" kicks in so the bank loses out rather than the estate.Either way they would still appear to be better off than with selling their house for £20,000 now and living in it rent free for the rest of their life.