Equity release companies..are they cowboys??

notlongnow_2

Hi, can anyone tell me about these companies that buy your house at a reduced rate and then when you die the house belongs to the company?

Are they cowboys? What percentage would they pay you for your house?

My mum is considering this and I have alarm bells ringing. Surely its not as straight forward as she thinks it is.

The inheritence factor is nothing to do with it at all. I want my mum to be able to enjoy her money but for her to get the money that she is worth.

She has sold her house but needs an extra amount of money to make up the shortfall for the bungalow she wants.

She is 65 and retired, no savings.

Can anyone shed any light on these companies please?

Trollfever

Advice from the FSA:

http://www.moneymadeclear.fsa.gov.uk/pdfs/equity_release_ink.pdf

BitterAndTwisted

As your mother doesn't currently own a property I'm not clear on what equity might be released or where from.

It seems to me that your mother needs to acquire a mortgage for the shortfall on the bungalow somehow

serbask

I agree, you cant do equity release when you dont own the house yet.

Norwich union (Avia) do equity release, they definately aren't cowboys, but do make a lot of profit from it. You borrow a set amount and it accumulates interest until the day you die. the interest is then calulated, the house sold, and any money left over after they take there's goes to the next of kin.

Ian_W

What income does she have? I agree with others that I don't believe she can equity release without owning a property so a mortgage is the only way. That or moderate her property ambitions - it seems strange she sold her present property knowing she couldn't afford the next one?

As for ER, it has evolved a bit over the years and is now regulated by the FSA but perhaps should be seen if not as a last resort then certainly not a first port of call. The respectable end of the firms who do it are members of SHIP (Safe Home Income Plans) and there is a lot of info on their WEBSITE.

notlongnow_2

Hi, she does own a property outright. Worth approx £125k The price she thinks is acheivable for a bungalow she wants is approx £142k. I understand she cannot release equity in a bungalow she doesnt own yet so my sister has offered to lend her the shortfall plus a bit extra for new kitchen etc. But my sis wants it back when she is in the bungalow and can get in touch with one of these companies.

Im just wary she will ripped off and be given a fraction of what the house is worth. And then be left with nothing when the money runs out if they only give her a small amount. She is very blinkered to this and I need to explore these companies for her and then try to give her a realistic view of them...not just the glossy adverts she has seen on TV.

Thanks for your replies so far.

notlongnow_2

Ian_W wrote: »

What income does she have? it seems strange she sold her present property knowing she couldn't afford the next one?

.

Tell me about it!!!! but that is just how she is. She should never have bought the house she is in now as her mobility is terrible!!

she has sold her house privately and intends to buy a bungalow. She can afford one in her price range but a usual, someone says some flippant comment to her and she seems to think she can go ahead and buy a bungalow that is out of her price range and it will be ok. I for one, dont see it this way but the stubborn old goat cannot be swayed otherwise...lol. So I need to go in fully informed so she doesnt just think im making it up!

She has no income as she is recently retired. She gets her old age pension and a small amount of pension credit and I may be wrong but there may be a small amount from my late-fathers steelworks pension.

She has just applied for attendance allowance as, basically she is kna**ered!.

poppysarah

Tell her to offer 125k for the bungalow or find somewhere she can afford outright.

To take on debt (equity release) is madness.

notlongnow_2

poppysarah wrote: »

Tell her to offer 125k for the bungalow or find somewhere she can afford outright.

To take on debt (equity release) is madness.

Thats exactly what I think. I also think she would be better off keeping the cash from her current house sale and just renting somewhere rather than be owned by one of these companies. At least she could enjoy it a bit( not that she leads a lavish lifestyle but just knowing that the bills are paid would be a help to her).

OR...get a stairlift in her current house and stay where she is..lol.

Milliewilly

notlongnow wrote: »

Hi, can anyone tell me about these companies that buy your house at a reduced rate and then when you die the house belongs to the company?

Are they cowboys? What percentage would they pay you for your house?

My mum is considering this and I have alarm bells ringing. Surely its not as straight forward as she thinks it is.

The inheritence factor is nothing to do with it at all. I want my mum to be able to enjoy her money but for her to get the money that she is worth.

She has sold her house but needs an extra amount of money to make up the shortfall for the bungalow she wants.

She is 65 and retired, no savings.

Can anyone shed any light on these companies please?

She might live another 30 years - 125K is ony 4K a year then, could she manage on 4K a year? Even 20 years which is quite possible is only £6250 a year? I always wonder if people think for the long term on this just because they're old doesn't mean they suddenly become wealthy from equity release.

lincroft1710

The trouble with renting is that most tenancies are for 6 months in the private sector. Therefore she could be homeless with only 2 months notice.

Because of her lack of mobility would she be eligible to be considered for sheltered housing or similar. Would a retirement apartment (pre owned) be within her budget.