Equity Release some questions. Anybody help??

monkeyintrouble

Hi all, I usually frequent the DFW forum but thought I might get an answer to this here. Im not that well up on finance but what I am after is some sort of equity release scheme. I have got myself into a lot of debt and currently paying my creditors through a DMP with CCCS. I know this cant go on forever and my plan was to sell my house and pay off all my debts with the equity in the property. I now realise if I do that I will have no chance of getting another mortgage due to my credit record. Someone mentioned equity release to me so I need to know more, can anybody help? What I would like is to "sell" 25% of my property at todays current value (£120k so to release £30k) and in 12 years time when I finish paying my mortgage I would then sell the house and take my 75% of the then current value. Is this how equity release works and would I be considered with my current credit record? Also, what sort of monthly payments would I be making for the next 12 years on top of my mortgage. Does anybody recommend any ER companies out there that could help?
Many thanks

pinkshoes

Here's the FSA info on equity release and how to find a company regulated by them:
http://www.moneymadeclear.fsa.gov.uk/products/equity_release/types_of_equity_release.html

Are you sure your property is "worth" £120k? You might want to look on houseprices.co.uk and find out what something very similar has sold for recently. It may be valued at MUCH less than this in the current climate.

To release £30k equity, then I am presuming your mortgage is thus less than £90k, so you do have a spare £30k to release? Are you over 50?

Selling your home might be a much better option.

monkeyintrouble

Hi, thanks for your reply. Yes, £120k is probably an underestimation if anything as I am taking the current market into account. It was probably worth about £139k twelve months ago. I owe approx £75k on mortgage so there is enough equity even allowing for a variation in value. I am 53 years old at the moment. My only concern is my credit record, thats why I prefer equity release as opposed to selling. If I do sell I know I wont get another mortgage. Im wondering if an Equity Release company will take me on with my current credit score.

Richard_Webster

Someone mentioned equity release to me so I need to know more, can anybody help? What I would like is to "sell" 25% of my property at todays current value (£120k so to release £30k) and in 12 years time when I finish paying my mortgage I would then sell the house and take my 75% of the then current value. Is this how equity release works and would I be considered with my current credit record? Also, what sort of monthly payments would I be making for the next 12 years on top of my mortgage. Does anybody recommend any ER companies out there that could help?
Many thanks

Equity release is:

1. A fancy name for a mortgage which is used to provide a lump sum for the borrower rather than for house purchase; or
2. Same thing but for elderly people where the loan will still be there (and if interest isn't paid regularly, will increase significantly) and when the person dies their family etc will inherit less; or
3. Company buys house and rents it back, or if person sufficiently old may pay less for house (taking a gamble on life expectancy) and not charge rent.

You can't in practice sell 25% of a house you are living in. In theory you could transfer it into joint names with your "buyer" so he has 25% and you have 75% and you pay him 25% of the rent you would otherwise have to pay if you were renting. To do this you have to pay off your mortgage because your lender is not going to agree to the transfer into anyone else's name unless it gets its mortgage repaid. Also it is unlikely an investor would want this kind of deal because they would have all kinds of hassle realising their 25% if you didn't pay the "rent" and they would have to apply for a court order to evict you and get the place sold. They simply wouldn't go there, so you can forget that option.

People remortgage in order to provide "equity release" because they want to buy a boat or something or to consolidate their debts. In theory you could do the same. Go to a lender and see if they will lend you another £30K on top of your existing mortgage (assuming there is enough equity left in the property). They will probably say No, given your credit history.

You could find a company that will buy and rent back to you - but they will pay you peanuts and the peanuts they pay will still have to be enough to cover the liabilities to your mortgage lender and everyone else, because the mortgage must be paid off on any sale or transfer. You will only get whatever change there is (if any) after they have all been paid.

monkeyintrouble

Looks like its back to the drawing board then. Has anybody got any ideas. I dont mind selling up but with my credit history I'll never get another mortgage. Seems a shame to sell up now when in 12 years time I will own my house outright and will then sell anyway but at least have something to live on (as I have no pension) with the proceeds.
Any suggestions would be welcome.

SouthCoast

You could find a company that will buy and rent back to you

FSA regulation aims to address consumer problems in sale and rent back market


http://www.fsa.gov.uk/pages/Library/Communication/PR/2009/022.shtml

Fire_Fox

Why do you say the DMP can't go on forever?

monkeyintrouble

Fire_Fox wrote: »

Why do you say the DMP can't go on forever?

Thanks. Its just I get the feeling most of my creditors are assuming the current plan is a short term arrangement, as they have mostly all asked for more money. Seems they are happy if the monthly payments will clear the debt within ten years, which at the payments Im making now, wont. When they realise this they seem to sell the debt on right away to a DCA. I've only been on my DMP for about six months and although most creditors are ok up to now, I've had a few tricky ones who have demanded more money per month and then sold the debt on. How the DCA will be with me I have yet to find out. I would just love to be able to clear the lot. Even more frustrating is when Im offered early settlements but have no funds to do so. Up to now, I could have saved about £7k off my total debt.

monkeyintrouble

SouthCoast wrote: »

FSA regulation aims to address consumer problems in sale and rent back market


http://www.fsa.gov.uk/pages/Library/Communication/PR/2009/022.shtml

Thanks, but as Richard Webster said, they will only give me peanuts for my house, especially in this present market. I really cant afford to do that.

pinkshoes

A way to pay off your debt quicker would be to get a second job, or a better paid one.

Could you not look at upping your income some how? Have you sold anything of value in your house? Given up expensive things like Sky tv etc... minimised all your spending?

monkeyintrouble

Thanks. Chance would be a fine thing. Jobs are about as common as mortgage lenders at the moment, and I think it would be foolish to leave a job of ten years to try somewhere new. I wouldn't stand a chance if the "new employer" suddenly had to make cuts. I already work 60 hours a week so not much chance of anymore hours where I am.
I dont subscribe to Sky tv or anything else extravagant. I use most of my disposable income on my DMP.
Thanks for your comments though, always food for thought.