Equity Release

Mistral001

Last year I enquired with "Age Partnership", which is a firm involved with equity release, about getting some equity release on my home and was told that I could not get it until I was 55 years old. I will be that age later this year and I am seriously considering doing this.

I am doing it to get some money to carry out some repairs to the house, paying off credit card and overdraft and investing in my business which is starved of cash at the minute.

Are there any big pitfalls I should look out for?


Any advice would be most welcome.

Thrugelmir

While being on interest only at such a low rate is helpful. The mortgage shortfall needs to be addressed before additional borrowing can be considered.

Mistral001

Thrugelmir wrote: »

The mortgage shortfall needs to be addressed before additional borrowing can be considered.

Any suggestions? I was hoping that the equity release would help me with the shortfall. Am I being naive in assuming that?

Moving to a smaller house or selling up and moving into rented accommodations are the only other options I can think of at the minute.

Thanks for your reply. It is much appreciated.

Thrugelmir

Mistral001 wrote: »

Moving to a smaller house or selling up and moving into rented accommodations are the only other options I can think of at the minute.

Maybe worth seriously considering. Unless you expect your income to increase substantially. Moving debt around rarely solves the fundamental issue just delays the outcome.

TrickyDicky101

Given your current outstanding mortgage, I highly doubt that at age 55 you will get any more in equity release than your current outstanding mortgage balance. Looks to me like you should consider selling up & downsizing.

Mistral001

TrickyDicky101 wrote: »

Given your current outstanding mortgage, I highly doubt that at age 55 you will get any more in equity release than your current outstanding mortgage balance. Looks to me like you should consider selling up & downsizing.

Actually that would be better than nothing as it would take away the fear of being forced to sell.

The idea is to give me a little breathing space until my income increases.

Just over two years ago, when I was earning a decent income in my buisness, I started to do some renovations to my house with the aim of selling the house eventually. It seemed a very sensible thing at the time. However, I got about three quarters of the way through this work when the recession started to hit home and work just fell of the cliff so to speak. I do not have any spare money to complete the renovations and fear the worse in that I will be forced to sell with the house in no where near a saleable state.

holly_hobby

Firstly I would ask if you have spoken to your lender to see if they have any options other than you having to sell, or enter in to a lifetime mortgage arrangement ? Putting that to one side quick guide on lifetime mges may assist.

Equity release as in an lifetime mortgage, as you now know generally has a minimum age of 55, redemption is on sale, death or entry into long term care - whichever occurs sooner.

Generally the advance is representative of a % of the property value (assessed by an valuer apponited by the provider), the amount of loan then determined by this and the applicants age.

Instead of monthly repayments being made, the occuring interest is rolled up onto the initial debt (although there is a provider who offers the facility to pay wholly or partly, the mge interest each month, to ringfence the debt, and avoid free equity erosion on redemption).

It make sense that the younger the applicant, the longer the potential until redemption (aka the lender gets their money back), and the lesser amount of % of property value that can be released - and obviously the greater the potential for free equity erosion. (which may or may not bother you, depending upon if you wish your estate/beneficiaries to benefit from the sale of your property following your death etc).

What others have told you, is that you already owe 36k on a perceived value of 120K (of which you say your property is also in a state of mid-renovation). At your age and property value (& condition) you may not even be offered 36k, let alone any more to repay your os commitments - so its certainly not a foregone that this is going to solve your problems. (sorry if that comes across as a bit harsh !)

You will only know how viable this option is by sitting with a equity release/later life adviser, and crunching some numbers in line with various providers criteria (don't forget to factor into your figures, the associated legal, mortgage (& poss broker) arrangement costs that will be incurred).

You already have a reference point, may be beneficial to know that Age Concern also offer general advice and local referrals to suitably qualified advisers. http://www.ageuk.org.uk/

The Society of Later Life Advisors (have a google for their link), also hold a list of national advisers whom have been further independently assessed (at their own choice & cost), regarding their proven proficiency in the area of long term care and equity release provision.

Or of course you also have your local yellow pages for a search for local brokers - whom you must ensure are suitably qualified Equity Release Advisers.

NB - there may be a fee for any advice and assistance sought and received from a ER adviser, so do check those costings before nominating your chosen broker.

Hope this helps and good luck ... but you must consider the very real prospect of you having to sell your property to redeem your os mge with your lender.

I wish you well

Holly

Mistral001

holly hobby

Thanks for your very comprehensive reply.

holly_hobby wrote: »

Firstly I would ask if you have spoken to your lender to see if they have any options other than you having to sell, or enter in to a lifetime mortgage arrangement ?
Holly

My mortgage is with my bank. The last time I spoke to them was over a year ago when I was getting very close to my overdraft and credit card limits (credit card, mortgage and bank account is all with the same bank). Basically they did not want to know me and made no suggestins other than "to go on the dole". I think they are smartuing a bit because of my very advantageous mortgage rates I have with them.

I was was thinking about having a word with them in the next few days or weeks, but really I do not expect them to give any advice as things have not changed much since last year. This is why I am looking at all other avenues at the minute. I get the impression that they only will provide advice when you begin to miss payments on the mortgage or cannot pay a bill. I have been very close to that (literally pence from that happening).

Thrugelmir

Mistral001 wrote: »

My mortgage is with my bank. The last time I spoke to them was over a year ago when I was getting very close to my overdraft and credit card limits (credit card, mortgage and bank account is all with the same ebank). Basically they did not want to know me and made no suggestins other than "to go on the dole". I think they are smartuing a bit because of my very advantageous mortgage rates I have with them.

Unsure what you expect your bank to do for you. As the decisions are yours alone to make.

holly_hobby

Okay, well you are currently standing on the edge of a cliff - you have little choice but to speak to your lender (however painful).

Then when you know what the position is, you can start to consider and put in place an escape route - we can't help you much more until you know what the actual situation you are facing is.

Make and appointment go in and try and thrash something out with them ... as the alternative on the info you have provided, may well be the erection of a "for sale" board I'm afraid .... its trite to say it now, but it really was silly to have ignored the shortfall warnings when you recd them, but we are where we are so lets see if we can find a way out of the mess.

Hope this helps

Holly

Mistral001

Thrugelmir wrote: »

Unsure what you expect your bank to do for you. As the decisions are yours alone to make.

Decisions have to be based on information. They could have given me information. That is what I was hoping for. It turned out that my hopes were in vain.