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Discuss the "Equity Release… I wish I knew the answer…" Blog

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Discuss the "Equity Release… I wish I knew the answer…" Blog

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MSE_JennyMSE_Jenny MSE Staff
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Part of the Furniture 100 Posts Combo Breaker
MSE Staff
This is the discussion to link on the back of Martin's "Equity Release… I wish I knew the answer… " blog. Please read the blog first, as the discussion folows it.


Read Martin's "Equity Release… I wish I knew the answer… " Blog
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  • JoscarJoscar Forumite
    139 posts
    If you downsize, moving to a smaller home is there a Capital Gains Tax to be paid?
    HOW MUCH CAN YOU SAVE?: OLYMPIC CHALLENGE 2007
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  • divadeedivadee Forumite
    10.6K posts
    Part of the Furniture 1,000 Posts Combo Breaker
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    Joscar wrote:
    If you downsize, moving to a smaller home is there a Capital Gains Tax to be paid?

    not if it is your main residence. No.

    If you own another property and rent it out etc... you would pay capital gains tax on that one.

    But you would not pay capital gains tax on the profit for your one family residence.
  • What about "private" equity release arrangements between grown-up children of the retiree who wants, and is generally encouraged, to enjoy it while he/she has it? Is there any advice available for setting up a fair scheme between siblings, some married and some not, some better off than others, which can allow for one or more children to buy fragmented equity in there parents' home without restricting there parents freedom to exercise their free will to downsize in future, and which still allows an elderly parent to have the personal pride of leaving something when they die? I would be grateful for any advise or pointers on this topic.
  • BobSMSBobSMS Forumite
    2 posts
    I recently looked into this on behalf of an elderly relative and totally agree with Martin's comments. There doesn't appear to be any 'good deal'.

    One alternative option, not previously mentioned, would be to sell the main property and invest the income as tax effectively as possible and then use the income to rent property. This enables you to have control of all of the proceeds of your property and move around when the fancy takes you.

    As the capital slowly diminishes, so does the amount that is available for councils to claim in order to pay for long term care.
  • My mother in law (77) looked at equity release but was horrified at the rolling up of the interest payments so that you were paying interest on interest. She instead took out an interest only mortgage (with a reputable high st building society) of about 15% of the total value of the property which gave her a good lump sum. She has top sliced an amount off to meet the payments over 5 years and is spending the rest (hols in South Africa, China and Europe over last 2 years...) she says the property is still going up in value and when the money runs out she will take out some more...
  • KeffoKeffo Forumite
    1 posts
    My brother and I have purchased 50% of our parents home with an interest only mortgage. We payed slightly under market value, which may cause problems in future (depravation of assets), but, hopefully, the more years go by, the less likely a problem it will become. We all now each own 25% of the property as tenants in common, so when the first parent passes away, then their quarter share passes to my brother and me via their will, and not to the surviving spouse. This reduces the chance of most of the property ending up in the governments hands to fund a care home. My parents, have agreed to gift to us £3000/year for a set period, to cover our mortgage payments for about 10 years (£3000 is allowed to be gifted each year without any depravation of assets implications).
    So now, my parents have money. My brother and I have a reasonably small interest only mortgage, which is being funded for 10 years by my parents ( bit like a loan). My parents can spend money improving their home, knowing that we will benefit from increased value. My brother and I have a growing investment.
    We will be liable for CGT on any gains when we sell, but as we only owe 25%, and hopefully it will be in more than 10 years, hopefully it won't be too much. The goverment will probably get the value of some of the house, if one or both end up in care, but they won't get all the house!
    We have tried to hedge our bets on all possible outcomes (which isn't too nice, when you are talking about your parents lives) to keep as much out of the governments and taxmans hands.
    My financial advisor had never done anything like this before, neither had our solicitors. The only lender we could find to do this was the Dunfermline (all 4 names appear on the mortgage).
    It works for us, it won't work for all.
  • Saffie_2Saffie_2 Forumite
    68 posts
    I never really paid any attention to these schemes, as i didn't need to. But then i found out that my nan and grandad had done this on their house!!! I'm all for them enjoying their money, but they took £20,000 out and 3 and a half years later they already owe £28,000!! Surely companies can't do this to the elderly?? To cut a long story short, my husband and i are now helping them to move home and pay it off before they have no home left.

    I just can't believe that people get away with doing this.

    :mad: :mad: :mad:
  • Juni_3Juni_3 Forumite
    170 posts
    Well, until this country realises that a house is a home and not a way of making a fast buck then these sort of rip-offs will continue.

    It'll all end in tears eventually.
    Debt in 1993: £35,000 | Debt in 2006: £0 | Assets in 2006: £2.3m and counting. :j

    Anything is possible with hard work, determination and the love of a good woman. :D

    There is no upper, middle or lower class. Simply those that have class and those that don't. ;)

  • SooTee_2SooTee_2 Forumite
    41 posts
    I don't know what the answer is but I work for Age Concern Across Norfolk on the insurance side for the over 50 market and we have an Equity Release scheme. When I went to the prelaunch, it seemed to me that though they had looked at this very carefully from the older person's view. If Martin or anyone else wants to find out about it, please ring 0800 169 5276 (ref. pe301qd) for some information to be sent.
    sootee50
  • I made enquiries about equity release and the firm were very nice and helpful but the result was that if I agreed I was virtually selling my house for £20,000 advance cash. I could not believe it. My house is only valued at £84.000 and the offer made was for £20,000 but with interest etc. when I died my family would have been left with nothing
    I would never advise anyone to take this out, there must be an easier way but so far I have not found it
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