equity release by moving into caravan

alanjk

My wife has retired and is only getting the state pension. I am due to retire and I will get the state pension + company pension which will realise £2500 pa (not much for a lifes' work!) We have our own home which could sell for £140k.
It has been suggested we should sell up and move into a static caravan. What thoughts do you have about this? what would be the average outgoings? Are there any alternatives?
Any help would be much appreciated.

EdInvestor

Have you both checked out the benefits/pension credit situation at the CAB? I would do that first to make sure you're claiming all the income you're entitled to.

How much money would be released if you followed the caravan (do you mean "park home"?) idea?

lisyloo

It has been suggested we should sell up and move into a static caravan.

Have you considered moving into a smaller property or one in a less expensive area.
My parents did this 3 years ago and it worked very well. The outgoings (gas, electricity, council tax) are lower and it's easier to clean as you get older.
They freed up £36K by moving to a 2-bed flat.
A few extra £K per year can make a massive difference to your quality of life.
Downside is that it may stop you receiving pension credit.
Have you tried applying for pension credit/savings credit?

Are there any alternatives?

If you really want to stay in your current propertly then an alternative is an equity release scheme.
I am in general nagative about these because you will be paying a chunk of profit to another company.
Basically you can stay in your house until you no longer need it (death or bursing home) then the insurance company get it.

These do have pros in that it allows you to stay in your existing property while giving you cash.
Downsides are that a large chunk of profit will be taken.
Downsizing (moving to a smaller property) means that you get to keep most of the money. Apart from estate agents and removals you get the rest.

Have you considered a similar house in a cheaper area?
Now you aren't working you have less restrictions over where you live.
Another alternative (bit more drastic) would be to move abroad, although I wouldn't suggest doing it merely for financial reasons alone. You have to WANT to live there.

You can find lots of information about equity release on the age concern website. They have literally LOADS of info about this.
You may find a scheme that acheives what you want but I think they are an expensive way of doing things.

Could you consider taking in a lodger for extra cash?
You don't have to pay tax on renting out a room up to £4K per year.

I hope that is some ideas anyway.

margaretclare

Hi Alan

We've had a look at 'park homes' which are really what you could call a static caravan.

Have a look at this: https://www.tingdene.co.uk

There are the usual for and against arguments. It depends on what you want, where you want to live, more importantly HOW you want to live.

At the start of the retirement years these are the type of questions you need to be asking yourselves - not just the question of money, but of lifestyle and how you see your future. Remember you could be looking at another 30 years, so it's important to make the right decisions now.

Come back to me if you want to discuss this further, because we've thought of this idea ourselves. We've also looked at McCarthy & Stone type homes and decided definitely against - an expensive old people's ghetto is what we thought of those - 'bird in gilded cage' springs to mind.

Best wishes

Margaret Clare

lisyloo

BTW - my parent have £26K in savings and still get pension credit.
So don't think you won't get it because you have savings.

aurora_borealis_2

I know of a few people that have moved into static caravans and it has worked very well for them. It feels like being on holiday and there is a nice community atmosphere. However, on most parks you can only keep the caravan until a certain age and then you must replace. Of course they constantly depreciate.


A better option is to look for a more solid alternative that will not depreciate, log cabins or chalets for example.The other drawback is that some parks will not let you live there as a full time residence, which in effect means that you have to vacate the accommodation for three weeks per year. This suits the people that I know well because they simply go abroad for a winter holiday instead.

My own mum and dad sold up and moved to a gorgeous rented flat in sheltered housing. They pay rent and keep their savings. Others have 'moved' their savings and claim housing allowance and the various other benefits that are available.

Good luck anyway, I hope you can release your hard earneds and have some fun with it.

margaretclare

EdInvestor wrote:

Have you both checked out the benefits/pension credit situation at the CAB? I would do that first to make sure you're claiming all the income you're entitled to.

With a company pension, and both of them getting state retirement pension, they're likely to be above the level for pension credit. However, it's possible to put the figures in and get an immediate answer online.

Have a look here: http://www.thepensionservice.gov.uk/pensioncredit/

Margaret Clare

PS: Why is everyone so keen on assuming that all retired people are going to be entitled to pension credit, or that they want to make financial choices on the basis of 'not releasing capital because it puts you above pension credit level'!

We did equity release 3 years ago to pay off an existing mortgage, value of property is now £165K or so, that still leaves £125K existing. And even when we did that, knowing full well what we were doing, our solicitor had a checklist to go through like 'have you discussed with your family (as if it was anyone else's business)' and 'do you realise the implications for pension credit?' Well, we knew we'd never fall within pension credit limits, with or without the equity release!

We did consider moving elsewhere, considered all kinds of different options, but in the end decided to stay here. We can't downsize much from a 2-bed bungalow, and over time we've spent time, money, thought and effort into making it comfortable and convenient for the later years of our lives.

lisyloo

Why is everyone so keen on assuming that all retired people are going to be entitled to pension credit

I am not assuming they will, but I certainly think it's worth checking if they haven't already. I was suprised my parents got it with £26K savings, so it's more generous than I expected.
Surely you must agree it's worth a few minutes to check rather than go without free money.

or that they want to make financial choices on the basis of 'not releasing capital because it puts you above pension credit level'

I'm not assuming that either.
But I certainly think it's worth warning people so that they can make an informed choice.
Surely you agree that making informed choices is a GOOD thing.

There are a number of factors to take into account, but it's an important decision which can affect peoples lives for decades so I think it's good to be as well informed as possible.

needmoney

Also equity release isn't an option if the house isn't valuable enough so pension credit comes in handy then.

lisyloo

Also equity release isn't an option if the house isn't valuable enough

I've only been through the procedure once, but I think the £140K house would be valuable enough to do equity release on if there is a desire to stay in the home.

Note that there are several types of scheme.
One if like a loan/mortgage in reverse where interest in added on (but never paid).
The loan is then taken when the house is never needed.
The remainder is available for the estate/familty.

There is also the kind where they give you money in return for a fixed % of your home.
If you die early this is bad for you (you didn't get much from it).
If you live a long time you are quids in.

Basically you need to find the type of scheme that suits you best.
Loads of info on age concern.

As I said before I prefer downsizing where possible as a financial company are not fleecing you. Costs of downsizing are low.
However it's not always possible and sometimes people have a strong desire to stay in their homes.

Another alternative (I've just thought of) is family buying part of the home.
This can be quite complicated i.e. you need wills to work out what happens if YOU die or if THEY die.
Family can also fall out.
But it could in some cirucmstances be a cheap way of releasing equity for the owners and a good investment for the buyers without a company fleecing you i.e. this is a private and cheap equity release scheme.
However you need to fully research the complications to (for example) make sure the house is not "repossesed" if long term care is needed.

EdInvestor

https://www.ship-ltd.org

is another useful website for both equity release and home reversion.

Also https://www.entitledto.co.uk

for benefits. (Council tax comes to mind).

With equity release, look for a low interest rate, a "drawdown" scheme where you take the money in chunks, not all at once, and low redemption penalties. You may want to change to a better deal later - the terms of these deals are continually improving as the market develops.

You can usually get more money at a younger age with home reversion plans, and you share in any appreciation of the percentage of the house you still own.