Equity release?

oopalah

Hi,
Does anyone have any experience of equity release? Is it possible to use it as a loan?
Any replies appreciated.

broad-sword_2

No experience and God willing never. Sorry if this is not what you want to hear, but IMO any finance deal that is aimed at loaning 'easy' money with a softener (in this case you'll likely be gone before we collect) is a non-starter to me. Again, apologies if you've already thought his through, and have a sound plan.

skintandscared_2

My parents looked into it, but it's financial suicide. You get your loan, secured on your property, and pay nothing back until the property is sold. Depending on how long you live, you could end up selling a sizeable asset for about a fifth of its worth. If you need to go into a care home in later life and the equity in your property is already spoken for (i.e. owed to the loan company for your equity release) you may face issues relating to deprivation of capital. Also bear in mind that, if applicable, any inheritance to your children is gone (low priority in my view but something that the loan companies insist you discuss with your family).

The best way to release equity from property if you own it outright is to sell up and downsize.

Gareth19

Yes it appears to be little better than payday loan companies praying on the vulnerable. By the time you have paid your mortgage off and are in the twilight years the last thing you should be thinking of is borrowing more money (which is in effect what equity release is)

fwor

I don't think it's fair to compare equity release with payday loan companies.

I looked into it (very briefly) for someone, and in some circumstances, it seems to make sense.

The example I was looking at was an elderly person who had had no children, with a £400k house but no pension and very little money. It seemed to make sense for her.

OP - any reputable equity release scheme should be subject to a code of practice published by an organisation called SHIP. I'd recommend that you only consider SHIP compliant members, and seek the advice of an IFA before signing up to anything.

pvt

Gareth19 wrote: »

the last thing you should be thinking of is borrowing more money (which is in effect what equity release is)

Quite right - you should be looking forward to dying with a huge personal asset intact so it can be buried with you, or perhaps bequeathed to make the little kitties comfortable down the local cat's home.

It's obviously going to depend on people's individual circumstances Gareth. In some cases equity relief is a quite sensible option. As long one deals with a reputable company and seeks advice as fwor suggests.

iolanthe07

My parents in law did do it, without proper advice, 14 years ago and have lost almost everything for a paltry return. For a lump sum of £10,000 in 1998 and £2000 a year since, they have lost all but 5% of a £200,000 house, and now they are both over ninety cannot afford to move. Please don't do anything like this without taking impartial professional advice.

Chesntoots

My Dad did an equity release some years ago. He and my mum divorced when he was in his 60's and he had to buy her out. Couldn't downsize as it was a small property anyway - short of a shoe box there is nothing smaller! Yes I have lost my inheritance, but the way I look at it, it wasn't my money in the first place and I would rather my Dad was financially secure in his retirement than having to worry about a loan to pay back.
Like another poster says, each circumstance is individual so it may not suit everyone.
The best advice is to look around, do your research and only do it if you are 100% sure about it. Don't rush into something you may not be able to get out of later.

sleepless_saver

oopalah wrote: »

Hi,
Does anyone have any experience of equity release? Is it possible to use it as a loan?
Any replies appreciated.

It's not a loan, no. You are signing over equity in your house and it would be difficult and very expensive to buy it back again.

Anyway, have a look at the Equity Release Council website - section on "what is equity release" which should make it clearer.

pvt

sleepless_saver wrote: »

It's not a loan, no.

Yes it can be.

There are numerous equity release products available, including types that are a rolled-up mortgage, which are loans that can be paid off (with interest) in the future if your situation requires it.

As, in deed, it explains in the first paragraph of the very link you posted.

sleepless_saver

pvt wrote: »

Yes it can be.

There are numerous equity release products available, including types that are a rolled-up mortgage, which are loans that can be paid off (with interest) in the future if your situation requires it.

As, in deed, it explains in the first paragraph of the very link you posted.

OK my bad. It's technically a loan, but you'd be unwise to use it as a normal loan solution. There are threads on other boards where people have tried to buy themselves out of equity release and found it impossible.

"If you repay a Lifetime Mortgage early you may be liable for extra charges called Early Redemption Charges. These can be quite expensive.

Most equity release plans are intended as long term options. You ensure you inform your adviser at the time of taking out the plan if you think you might want to repay your loan early. There are products available with specific periods of early repayment penalties, some products which have no such penalties and some products which have early redemption penalties that stretch for a pre-determined time such as 5 to 10 years.

If you have a Home Reversion Plan and want to pay off the loan early you may have to sell the property to pay off the outstanding due amount. You may find that you have too little money to purchase another property. However Equity Release Council Home Reversion Plans are portable to new acceptable properties and you may find that this is the best option for you."