equity release Good or Bad?

mr_clarke

Hello there, this is my first post and i would like a bit of advice for my Mum.
When my dad died my mum purchased her council house with the money she received from this. any surplus money she gave to charity as she deemed it blood money. 20 years on she is time rich, but very cash poor. She is now talking of releasing equity in the house to live off. i am fine with her doing this but i am worried that she will left potless and possibly homeless if she does the wrong thing. I was wondering whether, there are any altenatives to equity release or if not, is it an acceptable and cost effective way of releasing capital.My mum only draws the state pension and i have no doubt she wouldnt be able to get any sought of mortgage on these grounds. Also would my mum be liable for taxes if a lump sum found its way into her bank account.(say 20,000 pound), Also she doesn't want to move as she loves the area she has just moved to and the house is perfect for her and her advancing years(but i didn't say that.)
Hope someone can give some advice, cheers Adam

margaretclare

It's neither good nor bad. It all depends on individual circumstances.

We did it in 2003 because we wanted to pay off our existing mortgage, which would have continued until we're 83. Although we weren't as cash-poor as you describe, we could see pleasanter ways of using that money every month.

One thing to consider is: if your mum is only on state pension, releasing equity might affect any means-tested benefits, pension credit for instance. This was one thing we were warned about when we did it.

Modern schemes done through an IFA do NOT leave you homeless.

The first stop should be the SHIP website - safe home income plans. https://www.ship-ltd.org

What was all that about 'blood money'? I don't understand.

Savvy_Sue

margaretclare wrote: »

One thing to consider is: if your mum is only on state pension, releasing equity might affect any means-tested benefits, pension credit for instance. This was one thing we were warned about when we did it.

Another thing to consider is whether her state pension is all your mum is entitled to - if she was able to claim Pension Credit and / or any of the other benefits, she might not need to do this anyway.

sagalout1954

I'm with Savvy_Sue on this. Before anything else are you SURE she's getting all she's entitled to by way of various benefits. My Mum is in her 80's, owns her council house, has a couple of private pensions and a couple of grand in savings but still gets a further reduction in her Council Tax (on top of the single occupancy).

Your Mum sounds financially worse off so you should check she's getting all she's entitled to. Visit your local Age Concern for advice (& they'll probably be able to advise on your equity questions as well anyway).

Please don't say "she doesn't like to claim benefits etc" - take a look at our illustrious MP's, happy to grab everything they could get out of the taxpayers pockets, even when it was clearly FRAUD.

meggsy

A timely warning today .....

http://www.dailymail.co.uk/money/article-1202162/JEFF-PRESTRIDGE-Drive-equity-release-advice-cheats.html

my father and mother-in-law were caught out in the early
equity release schemes of the 80's unfortunately as in the article.

margaretclare

The article does point out that equity release in the 21st century is far different from the schemes of 20 years earlier. It does also make reference to SHIP, and I posted the link to this. I said that their website should be the first stop for anyone considering this. There is a lot to consider, but scare stories from the last century may not be helpful.

It has worked well for us, but we did consider it well from all angles before we took that step. We even considered 'downsizing', but there's not much you can downsize to from a 2-bedroom bungalow in Essex, unless it was to an ex-Coal Board house in a former mining village in the Midlands.

We didn't have the problems of (a) family members looking to us for an inheritance and (b) means-tested benefits. Everyone's circumstances are different, and it's not a move to be undertaken lightly.

meggsy

margaretclare wrote: »

The article does point out that equity release in the 21st century is far different from the schemes of 20 years earlier. It does also make reference to SHIP, and I posted the link to this. I said that their website should be the first stop for anyone considering this. There is a lot to consider, but scare stories from the last century may not be helpful.

It has worked well for us, but we did consider it well from all angles before we took that step. We even considered 'downsizing', but there's not much you can downsize to from a 2-bedroom bungalow in Essex, unless it was to an ex-Coal Board house in a former mining village in the Midlands.

We didn't have the problems of (a) family members looking to us for an inheritance and (b) means-tested benefits. Everyone's circumstances are different, and it's not a move to be undertaken lightly.

I'm pleased that the scheme has worked well for you margaretclare, I posted the link because I thought the article gave a very balanced view.

The Which report is on the following link .....

http://www.which.co.uk/news/2009/07/two-thirds-of-equity-release-advisers-fail-test-180694.jsp


Also Ship responds to Which mystery shopping exercise ....

http://www.ship-ltd.org/pressarticlesarchive.aspx