Equity release schemes

donmaico

My wife and i are seriously considering taking out one of these in the form of a lump sum so we can invest in making home improvements such as an extension( kitchen diner).We hope such improvements will add value.The house is worth abut 270k in todays market and we reckon to need about 50k all told.
We dont have a family as such and our main concern is that each of us is ok till death.We do have two godchildren we would like to leave something to but as we own two other properties as well which we rent , our main asset isnt such a concern.Nevertheless we would like to make a prudent choice so I would welcome any advice from people here.Thank you

magpiecottage

The amount you can get will depend on your age.

Options are: sell the property (or a portion of it) in exchange for the right to live in it for life or until neither of you wants/needs to any more ( but don't expect to get the full market value - the younger you are the less you will get).

If you were to no longer need the property soon after starting the plan, it would be very expensive.

You will not pay any interest (it is not a loan) but may have to pay a nominal rent and will remain responsible for maintaining and insuring the property.

Take out an interest-only mortgage. This will retain the value over and above the amount of the mortgage but will mean you will need to have sufficient income to meet the payments.

Take out a rolled up interest mortgage. This means no interest is paid but simply added to the loan. This will mean interest is charged on interest and it can roll up quite quickly. On death or moving out permanently the loan is repaid from the sale of the property. Most now have a "no negative equity" guarantee but the amount is likely to become very high if the plan runs for a long time.

Remember, too, that all of these could cause problems if you decide to trade down later, there may be alternatives and raising capital can have an effect on state benefits (though I suspect not in your case).

I recommend you speak to an Independent Financial Adviser who holds either the Certificate in Regulated Equity Release (from the Institute of Financial Services) or the Certificate in Equity Release (from the Chartered Insurance Institute).

An adviser without one of these qualifications is not normally able to advise you on these matters.

donmaico

magpiecottage wrote: »

The amount you can get will depend on your age.

Options are: sell the property (or a portion of it) in exchange for the right to live in it for life or until neither of you wants/needs to any more ( but don't expect to get the full market value - the younger you are the less you will get).

If you were to no longer need the property soon after starting the plan, it would be very expensive.

You will not pay any interest (it is not a loan) but may have to pay a nominal rent and will remain responsible for maintaining and insuring the property.

Take out an interest-only mortgage. This will retain the value over and above the amount of the mortgage but will mean you will need to have sufficient income to meet the payments.

Take out a rolled up interest mortgage. This means no interest is paid but simply added to the loan. This will mean interest is charged on interest and it can roll up quite quickly. On death or moving out permanently the loan is repaid from the sale of the property. Most now have a "no negative equity" guarantee but the amount is likely to become very high if the plan runs for a long time.

Remember, too, that all of these could cause problems if you decide to trade down later, there may be alternatives and raising capital can have an effect on state benefits (though I suspect not in your case).

I recommend you speak to an Independent Financial Adviser who holds either the Certificate in Regulated Equity Release (from the Institute of Financial Services) or the Certificate in Equity Release (from the Chartered Insurance Institute).

An adviser without one of these qualifications is not normally able to advise you on these matters.

Thank you yes I will do that.Its actually for a property we had in mind to retire to, like the last one before we are removed in a box or have to go into care.W e kind of thought that as the loan would be used for home improvement , that it would eventually be offset by an increase in value due to those improvements.Both of us are in our middle 50s so the loasn would be a long term thing