releasing equity?

alyssa_mae

My parents are talking about releasing equity on their house to bring in extra money.They have just both retired.And are finding things a bit tight. Is this a good thing. can anyone advise.

jonesMUFCforever

This depends on a lot of things eg How old are they?How much would they want to release? What sort of property is it and is it in a desirable area that will appreciate with time? Will they want to pay say the interest on the lump sum now or wait for everything to be settled on death?

What I would be very WARY OF IS SCHEMES THAT TAKE A PERCENTAGE OF HOUSE VALUE (I make no apology for capitals) eg house is now worth £100k and your parents want to release say £40k (40% of house value), some schemes may want your parents to pay interest now others will roll everything up until death. THESE COMPANIES will 'cash in' when your parents die because the Executors will not be paying back £40k that they borrowed but 40% of the value of the house when they die which could be a substantial sum if we go through another property boom.

A few other thoughts - Are you the only child - could you raise the amount that is required by mortgage to give to your parents in exchange for a share of the house?

Whatever they decide to do please please make sure that they take Independent advice and not rely on a salesperson/advisor from a bank building society etc.
I would also advise going to see a solicitor for legal advice and an accountant for the financial side of things especially if the house is in Inheritance tax bracket.
Eric

alyssa_mae

ejones999 wrote:

This depends on a lot of things eg How old are they?How much would they want to release? What sort of property is it and is it in a desirable area that will appreciate with time? Will they want to pay say the interest on the lump sum now or wait for everything to be settled on death?

What I would be very WARY OF IS SCHEMES THAT TAKE A PERCENTAGE OF HOUSE VALUE (I make no apology for capitals) eg house is now worth £100k and your parents want to release say £40k (40% of house value), some schemes may want your parents to pay interest now others will roll everything up until death. THESE COMPANIES will 'cash in' when your parents die because the Executors will not be paying back £40k that they borrowed but 40% of the value of the house when they die which could be a substantial sum if we go through another property boom.

A few other thoughts - Are you the only child - could you raise the amount that is required by mortgage to give to your parents in exchange for a share of the house?

Whatever they decide to do please please make sure that they take Independent advice and not rely on a salesperson/advisor from a bank building society etc.
I would also advise going to see a solicitor for legal advice and an accountant for the financial side of things especially if the house is in Inheritance tax bracket.
Eric

Thank you for your advice I shall pass this on to them.

Debt_Free_Chick

Age Concern have some very good information about the different ways of doing this.

http://www.ageconcern.org.uk/AgeConcern/information_794.htm

And you can call them on a freephone number if you have any questions.

HTH