Is equity release really a last resort?

vet8

My husband and I have no children and no dependants and have no-one we want to leave our money to -such as it is!

We are considering taking out equity release on our house to give us more money in retirement. I have been researching the options and every web page or article I read always says, that equity release should a be a "last resort" and do not do it unless you are desperate. They also say that this willl reduce the amount of money you leave to your heirs, but we have no heirs.

What do people think? Is it that bad?

Thanks

EdInvestor

There are pros and cons with equity release as with most products: I would certainly not describe it as a "last resort".

#It would be better to release cash by moving to a cheaper property if you can, as you will get better value - and can do equity release on the 2nd property later on.

#Equity release becomes better value as you get older, as you can get more money out

#It's especially suitable for people without heirs

#If carefully managed it can potentially provide an ongoing source of cash, if house prices continue to rise, and the loan is well managed, by using "income drawdown' instead of taking a large lump sum up front and seeking the lowest interest rate possible, considering remortgaging if rates fall.

#Equity release can be very useful either to raise funds to pay for care, (or to redeploy funds which otherwise might be forcibly used to pay for care)

Willman_Rodders

Is equity release an FSA regulated product now? I recall (when I was stopping being an IFA) there was talk about it becoming so, and that only advisers with the appropriate qualifications and professional indemnity cover therefore being able to sell it.

If this is the case there are two [sceptical] conclusions one could draw ...

1. Financial advisers without those qualifications (and supporting websites) will argue that the product should only be considered as a last resort (because they can't discuss or sell this product, and they have other products they can sell instead - but which might not be as apropriate); and
2. Have a discussion with a financial adviser who has the required qualifications.

Can anyone clarify if equity release is now a regulated product?

Ian_W

I believe it is - Lifetime Mortgages have been for a couple of years, Reversionary schemes became regulated in April I believe.
However your scepticism may not be misplaced as I think only certain qualifications allow IFAs to advise on them - though I'm not sure what these are.

There are factsheets at:
https://www.ageconcern.org/AgeConcern/Documents/Raising_income_or_capital_from_your_home_FS12.pdf
and
https://www.helptheaged.org.uk/NR/rdonlyres/84198B3B-A3D7-4FA7-85DD-69DA36696F8D/0/equity_release_advice_guide.pdf
which may give a more impartial view and the umbrella organisation for the more responsible end of the market is at:
https://www.ship-ltd.org/

Otherwise I'd agree with Ed's observations.

dunstonh

I can do it but I still stay that it is a last resort. It isnt something to go lightly into because its a decision you cannot go back on.

If it's needed fair enough but it isnt something you should plan for. If you have no dependents though it can be a good way to enjoy your money rather than living a poor lifestyle in a house that goes to Gordon Brown or some unknown.

EdInvestor

dunstonh wrote: »

It isnt something to go lightly into because its a decision you cannot go back on.

I don't think this is true.With equity releaae you still own the property, you have just taken out a loan against the value.Any increase in the price of the property still comes to you and you can still sell the property and move elsewhere.

You can also remortgage ( ie renegotiate the equity release contract) if interest rates move in your favour and /or house prices go up.You can also control the rollup of the interest (which eats into your remaining equity in the property) by only taking money out as and when you need it.

A modern equity release contract is much more flexible than a traditional pension annuity and what's more, the income is tax free .

the.weekender

I too have been considering ER, and have had delivered a brochure from Cavendish, which I have not yet had time to read.
I am 61 next birthday and the wife is 57 next, we have no children, no dependant relatives etc etc
We have not got on for a long time, but finding it difficult to split up and move in to decent accomodation.
I am looking at selling my half via Equity release.
The reason being, we can stay in the house, the wife still feels secure but in the winter times I will have some dosh to go travelling.
I hate the UK winters, but don't we all?
The house is worth, 240K, mortgage outstanding, very small, but could be erased before ER.
if anyone knows a good equity release IFA or solicitor, plese send PM.

defender_of_the_weak

It is much better to arrange your own equity release. Borrow more than you need and bank a number of years interest payments. Use the capital for whatever you want and in 5/10 years time when the money on deposit runs out reassess. Any growth in the property is 100% yours in the interim

vet8

Thank you for all your very useful replies.

Sorry I am so late thanking you, I have been working too hard to get to read this board!!!