Equity release companies..are they cowboys??

poppysarah

Milliewilly wrote: »

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.

And so what other money does she have to live on?
You can't argue that she'd only have 4k a year to manage on if in reality she has other income.

If she doesn't have any other income then how would she manage the bills etc?

Milliewilly

poppysarah wrote: »

And so what other money does she have to live on?
You can't argue that she'd only have 4k a year to manage on if in reality she has other income.

If she doesn't have any other income then how would she manage the bills etc?

??She must have other income that supports her cost of living otherwise on what she has been living for the past however many years as a widow whilst she is sat asset rich but cash poor in her privately owned £125K house that she now wants to sell to get a more expensive bungalow ?


All I am saying is as a homeowner with (presumably) no benefit entitlement £4k / £80 per week is not a lot more to live on for the rest of your life and pay bills and pay back the daughter's £17K + for a new kitchen, moving costs and the loan for the difference to buy the bungalow.

That is also assuming she resists the temptation to spend a chunk on holidays / new car etc - there is already a new kitchen in the mix!

notlongnow_2

Milliewilly wrote: »

??She must have other income that supports her cost of living otherwise on what she has been living for the past however many years as a widow whilst she is sat asset rich but cash poor in her privately owned £125K house that she now wants to sell to get a more expensive bungalow ?


All I am saying is as a homeowner with (presumably) no benefit entitlement £4k / £80 per week is not a lot more to live on for the rest of your life and pay bills and pay back the daughter's £17K + for a new kitchen, moving costs and the loan for the difference to buy the bungalow.

That is also assuming she resists the temptation to spend a chunk on holidays / new car etc - there is already a new kitchen in the mix!

Her income came from her job until approx 6months ago when she retired. She has worked all her life in minimum wage jobs and just about broke even every month. She has been working part time for approx 10years as her health restricted her. She spent many years paying off debt. She had a widows pension when I was young as my dad died when I was little. So she has had her wages and child benefit up until I was 18 and whatever the widows pension was. She has never had a mortgage...I presume this was paid when my dad died.

She hasnt had a holiday for many many years...probably about 18yrs and has only ever owned second hand cars which she has run into the ground before she had to buy a new one. She has struggled for years and years, rarely buying new clothes. She has no hobbies and goes no where. She has no luxuries apart from her cats.

She lives in a 2 bed semi which she cannot afford the work that needs doing.

All she wants is not to worry about the bills. She has what ever the pension credit takes her up to per week...£117??I maybe wrong, im not sure.

The bungalow she wants is 2 bed and fairly small. She needs all on one level due to her bad mobility.

I know she is mad to want a more expensive bungalow, this is due to her naivity about these equity release companies. She thinks she will be financially secure then but I dont think she will.

I cant begrudge her wanting a new kitchen when the only 'luxury' I can remember her ever buying was a new boiler!lol. If she can find an alternative bungalow that doesnt need a new kitchen then she wont buy one...and believe me, im searching for a cheaper more appropriate property for her.

Thanks for all comments...some very interesting reading that will hopefully get through to her that she is making a bad decision.

notlongnow_2

lincroft1710 wrote: »

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.

She has applied for the council list as she has a whole list of medical problems. She has never applied for any kind of disability benefits as she was embarrassed. So she has dosed herself up on morphine and gone to work. She will consider a retirement place and has kind of been looking but she gets a daft idea in her head and its very difficult to talk her out of it.

hopefully her claim for attandance allowance will be successful and will make it easier for her financially and maybe get these silly ideas out of her head. She doesnt want load of money...just enough.

Thankyou. your replies are much appreciated.

Ian_W

Given her health and disability problems the ideal solution for her would be Housing Association, Council or some form of sheltered accommodation but I would imagine it can be hard to find in many areas. I think private rented has the potential to be a disaster - albeit she would have released all the money from her house to help with day to day living and even, if she's up to it, some luxuries.

If she insists on making the move to this bungalow then Equity Release may be about her only way to provide a better standard of living than she has now. The view that "To take on debt (equity release) is madness" really condemns her to spending the latter years of her life as you've described it up to now and frankly is callous!

The "pros" of ER is that she can release money tied-up in her home to improve her life, she doesn't have to take it as a lump sum she can take some or all in a form of drawdown, she has a guarantee against negative equity and she won't have to pay a penny back until the house is sold either on death or going into residential care.

The "cons" are she won't get as much money as she thinks - at 65 on a £142K home she'll probably only get between £35-45K. If her medical conditions impair her life expectancy, rather than just make life tough, she might get more - but nothing like the full value of the property. Because the interest rolls up over time it appears expensive, though the APR is probably less than most consumer finance. It may affect the benefits she currently gets - though some are not means tested. Lastly, though I know you're not bothered, it will reduce the value of the estate she leaves.

You seem to have convinced yourself that ER = cowboys, I think you're mixing them up with sale & leaseback which is completely different. Use the link I provided and research it thoroughly yourself, there are some large co's and building societies who offer it. Sure they are in it to make a profit, all co's need to do that, but what you've to decide is whether it can benefit your Mum and give her a better lifestyle.

BoL.

notlongnow_2

Ian_W wrote: »

Given her health and disability problems the ideal solution for her would be Housing Association, Council or some form of sheltered accommodation but I would imagine it can be hard to find in many areas. I think private rented has the potential to be a disaster - albeit she would have released all the money from her house to help with day to day living and even, if she's up to it, some luxuries.

If she insists on making the move to this bungalow then Equity Release may be about her only way to provide a better standard of living than she has now. The view that "To take on debt (equity release) is madness" really condemns her to spending the latter years of her life as you've described it up to now and frankly is callous!

The "pros" of ER is that she can release money tied-up in her home to improve her life, she doesn't have to take it as a lump sum she can take some or all in a form of drawdown, she has a guarantee against negative equity and she won't have to pay a penny back until the house is sold either on death or going into residential care.

The "cons" are she won't get as much money as she thinks - at 65 on a £142K home she'll probably only get between £35-45K. If her medical conditions impair her life expectancy, rather than just make life tough, she might get more - but nothing like the full value of the property. Because the interest rolls up over time it appears expensive, though the APR is probably less than most consumer finance. It may affect the benefits she currently gets - though some are not means tested. Lastly, though I know you're not bothered, it will reduce the value of the estate she leaves.

You seem to have convinced yourself that ER = cowboys, I think you're mixing them up with sale & leaseback which is completely different. Use the link I provided and research it thoroughly yourself, there are some large co's and building societies who offer it. Sure they are in it to make a profit, all co's need to do that, but what you've to decide is whether it can benefit your Mum and give her a better lifestyle.

BoL.

Thankyou for your kind and informative reply. I read on one of the links that they offer between 20-60% of the house value. So worst case is that she would be offered say...30k. She will have to give my sister her 20k back plus a minimum of 1.5k arrangement fees to the company. Thus leaving her 8.5k to spend on herself. Not a lot of money for her retirement plus she will no longer be a home owner as such.

I am at her house now and am going to tentatively approach the subject.

Wish me luck.....

Ian_W

notlongnow wrote: »

Wish me luck.....

Good luck!

Like I said, there are probably better solutions but at the end of the day she's had a tough life and ER MAY make her latter years a little better, so don't write it off before exploring it thoroughly. :cool:

notlongnow_2

I have had a word with her...she hasnt kicked me out of the house yet for interferring!!lol. She didnt realise that she would be offered so little and has said she wouldnt jump into something without taking a proper look. I have found her some cheaper bungalows in her price range and she seems positive about it.

She says she is only just breaking even and just wants to have a little in the bank to 'go away for a few days'.

All in all a positive result as I was fully expecting for her to fall out with me.

chappers

If i were you I would be speaking to an IFA about her options, they will probably have more knowledge about the good and bad in the equity release market.