Equity Release...Advice Please

LULULU1

My father who is 78 has been offered a 30k loan on his property for a charge of 45k which we will pay after he dies. He is 78. Is this a reasonable deal.

Thanks

Ilian2008

Hi, is this offer from an institutional lender like Norwich union or an individual?
There is a lot of criticism about the schemes and i understand that they are only good if somone is income poor cash rich and doesnt want have any family to leave money to or rather their family doesnt need or you want to leave them any as of course there is less inheritance left over. You should make sure he takes proper advice and the schemes take a number of forms.

best of luck

LULULU1

It is from an individual who works for a company. None of the family want him to do it but there doesn`t seem to be any other alternative.

louiser123

i would be extremely wary of this!!!

my mother who is equity rich but cash poor took out a lifetime mortgage with norwich union as we insisted as she was really struggling. we ensured that there were clauses in that meant if she lost money in house value like now with recession everything would be safe. if you must do this it is a good idea to stop elderley in poverty but cuts any inheritance to be left. this didnt bother me i am only one and the house would have been mine once she had passed away but i wanted her to have a decent life for the rest of her days instead of giving it to me.
get advice properley and make sure every angle is covered before going ahead, it is not a quick process either took 3 months or so for mum to get the money through.

koexelek

LULULU1 wrote: »

My father who is 78 has been offered a 30k loan on his property for a charge of 45k which we will pay after he dies. He is 78. Is this a reasonable deal.

Thanks

Without being too blunt about it, it depends how long your dad lives.
If he does not live very long, it could be a terrible deal, but if he lives for a long time, it could be a good one.

If you have to go down this route, I'd suggest an equity release where the interest rolls up might be a better option. This way, interest is charged from day one, to date of death, so you know you are going to get fair value for money.

FraudBuster

Some advice from the FSA can be found here:

http://www.moneymadeclear.fsa.gov.uk/guides/retirement/managing_in_retirement.html

feisty1

LULULU1 wrote: »

It is from an individual who works for a company. None of the family want him to do it but there doesn't`t seem to be any other alternative.

I am an IFA/Mortgage Adviser qualified to transact Equity Release (not all advisers are).........

I am just hoping what I have highlighted in red is maybe a mis-understanding.

I have heard of unscrupulous people dealing in such areas and the older person doesn't fully understand the implication of what they are signing.......and without scaremongering I have known people sign properties away for a fraction of the value.

An equity release adviser (with the permission of yr father) will be more than happy to meet all the family and discuss openly and honestly regarding this plan..............In the past some of these plans meant family members being left with debts once their parents passed on, however now all reputable lenders have a no negative equity guarantee and work by a strict code of practice. http://www.ship-ltd.org/ Please refer to the web link I have attached for further info on this.

.........Lenders such as Prudential, Norwich Union etc adhere to a strict code of practice as set out by SHIP - Safe Home Income Plans. The idea behind SHIP is to protect the customer and provide certain guarantees, such as the No Negative Equity Guarantee. Please note Ship are not lenders, I say this because a similar thread appeared on here last week, someone who wasn't qualified and didn't understand ER started posting "incorrect information" which could have totally mis-led people. No matter how many times I posted an explanation of who Ship are, they kept posting about them not being FSA regulated!! Which was completely irrelevant as they do not have to be as they are not involved in actual transactions. This is proof that ER is a highly specialised area which should only be discussed with an appropriately qualified person as apart from the unscrupulous their is also the mis-informed.


I have also attached links for you to read explanations of the plan............

http://www.pru.co.uk/retire/lifetime_mortgage/how_does_the_plan_work/

www.norwichunion.com/equityrelease

LULULU1

Feisty1,

Just to say a sincere thank you for your advice.

LULULU1

Do you know roughly what the interest rate is on a lifetime mortgage.

Many thanks

EdInvestor

LULULU1 wrote: »

Do you know roughly what the interest rate is on a lifetime mortgage.

Last time I checked around 6-6.5% seemed to be the norm, but may have come down following recent sharp cut in rates.

feisty1

[quote=LULULU1;17377739]Do you know roughly what the interest rate is on a lifetime mortgage. Many thanks[/quote]

Rates are more 6.5%-7.5%, the way lifetime mortgages work you will always pay a higher rate......it would be wrong to try to do any comparison to any other type of mortgage

I should have said their is also a product called home reversion don't get this mixed up with ER.........However, if u know a good adviser ask them if they're experienced in ER or if they could refer you to someone ..........