Long life and equity release!!

JS477

If you took out (if that's the right phrase) an equity release on your property at say 60 yrs old then lived another 25 years and it turned out that your estate wasn't sufficient enough to pay off the loan what would happen? Or wouldn't this situation arise with equity release?

Thanks

Totton

My understanding is that the debts are owed by the estate of the deceased, if there are no assets then the debt would most likely be written off but it may all come down to the contract signed for the equity release.

I thought that these equity release firms were very careful about paying out too much, they calculate the % on age and social factors afaik. You may be lucky to get around 25% of the property value so I'd expect the property to be valued more than the debt owed, especially after 25 years.

Interesting link http://www.saga.co.uk/money/work-and-retirement/equity-release-expert-q-and-a.aspx

oldvicar

I think its better than that:

Yes, if you live for ages after taking out Equity Release, and if property prices remain subdued compared to interest rates to be charged, then it is somewhat possible that the mortgage debt exceeds the VALUE OF THE PROPERTY. But as I understand it now the majority of 'decent' equity release products include a 'no negative equity guarantee'. In other words the debt will never exceed the value OF THE PROPERTY.

IF you have other assets in the estate, then they will not be called upon to settle the debt. It does rather beg the question of why take out an equity release if you have other assets, but many different circumstances prevail. Say, for example, you took out an equity release and then received a large inheritance, lottery win, or whatever. These winnings would not be required to cover any equity release mortgage shortfall (for decent schemes).

Jimmbron

This new body has been set up to maintain standards in Equity Release - may be worth speaking with them

http://www.equityreleasecouncil.com/home/

Definitely an area where one should tread with caution IMHO