equity release hard to decide

spaniel_dog

health not good need to put finances in order,own house so looked at equity release schemes. cant decide which, if any, would be the lesser evil. There are the type which is a loan paid back when the house sold but penalty of £5000 for early release,under 5yrs which would be the case for us. There is the other type where you sell them 50% your home,reduced value, continue to live in it but you no longer own home. any advice or thoughts please:

ACG

What is it your trying to achieve?
Could you not take out a secured loan or a small mortgage if your intention is to pay it back within 5 years?

(Just to note, im not qualified to give advice on Equity release, but i can atleast help look for alternatives which you may prefer)

spaniel_dog

plan is to pay off all debts be debt free expect will have to sell up house and move to suitable accommodation within next 5 yrs not ready to give up my lovely home yet and sell up at this time

ACG

Do you have a mortgage at the minute?
How much is your property worth?
How much is the mortgage?
How much are the other debts?

spaniel_dog

no, 75K, 20k, we are pensioners

ACG

It might be possible to get a normal mortgage over a shorter term to take over those loans? Depends ultimately on your incomes (pension incomes are allowable) and your ages.

I think you need to sit down with a broker, at this stage there may be options other than equity release but a lot more info is needed.

TrickyDicky101

Your ages will be very relevant to any option as if you are on the younger side equity release may not provide enough funds to pay off your existing debt.

spaniel_dog

had thought about mortgage but that is still a debt so wouldnt be debt free, have had estimate and would be able to release the 20K needed but problem would be the 5K redemption if sold up early

ACG

So you basically do want to be debt free then? In that case i think equity release is your only option.

Unfortunately i dont hold those qualifications, i think you need to sit down with a broker who can do that. Although i think there is a member on here called Kingstreet who does hold that exam, he may be able to be more use than i am.

holly_hobby

I am a qualified Equity Release adviser and auditor.

Lifetime equity release mortgages are not designed as short term arrangements, but rather as a longterm solution for asset rich cash poor indviduals (repayment generally on entry into long term care or death), hence the rather hefty ERC penalties.

There are 2 basic variants of lifetime mge arrangements.

1. You obtain a cash advance representaive of a % of the value of your property (and based on the youngest applicants age), with interest (at broadly currently the 6% mark), rolled up and added onto the debt. Obviously over time, this will erode the free equity in your property - unless you select a scheme that permits the payment of interest on a monthly basis, to effectively ring fence the debt.

2. Home reversion scheme - this is where you actually sell a % of your property equity, in exchange for a capital sum. Accordingly there is no interest roll up, as the debt will represent a % share of the property value, which may well vastly exceed the original advance if markets rise, or of course could go the other way !

You should of course ensure that any scheme has a no neg equity gte.

My strong advice would be to avoid switching these unsecured debts, to essentially secured debts on your home (either via a lifetime mge or traditional mge based on income). Especially if you do intend to sell the property, and no longer hold a mge (ie won't be porting), then to avoid altogether any traditional lifetime mge arrangement - due to the relatively high interest rates (which will be possibly even higher than that of your unsecured debts), and hefty redemption charges.

If you intend to sell in the short to medium term anyway, and this exercise is because you are struggling to meet your monthy commitments, your first job is to ensure you are in recieipt of ALL income and qualifying benefits and assistance available to you ( including unclaimed pensions, investments etc, and whether you have any illness protection on your debts that could meet their payments.

You also speak to your creditors, explain your financial situation, submitting a budget planner and coming to a temp arrangement for suspended interest and a reduced repayment plan due to finanicaly difficulty (CAB will assist in both liasing with your creditors and constructing your budget planner). With for example the future aim to fully redeem the commitments upon sale of your house, and your move into alternative accomodation (* also don't voluntarily agree to any charging order, as long as you can and are meeting the agreed reduced repayments, there is no requirement or need to).

I cannot stress highly enough that I do not, and would not recommend transfering any unsecured debt onto a secured basis (via any mge arrangement), esp when the interest rates on any Lifetime mge will be quite meaty, as well as any early ERCs (given that you know you want to move within a relatively short period of 5 yrs).

Chat through your options to avoid a lifetime (or indeed a traditional remortgage given your ages) with CAB or any debt charity, and then if you still want to consider a lifetime arrangement etc, with the associated interest & fees, you know that you've covered all alternative bases.

If you are looking for a local qualified and authorised equity release adviser, try SOLLA website - http://societyoflaterlifeadvisers.co.uk/, whom have details of local individuals whom are not only qualified in this area, but have also chosen to be independently assessed and accredited on their proven proficiency in the area.

Equity release council (old SHIP), also has valuable info to explain the area of advice, and help to locate quailified and authorised advisers - http://www.equityreleasecouncil.com/home/

Here's a link to Age Concern too - http://www.ageuk.org.uk/money-matters/money-management/debt-advice/ - I have highlighted the page on debt matters and assistance, but also have a good read about, there's lots of guidance on benefits, pensions, etc, etc ... make sure you utilise all available sources of free help and assistance to you .... including us guys here x

Hope this helps

Holly xx

spaniel_dog

many thanks this is just sort of advice was looking for, we have spoken to adviser who gave us some figures and explained the two plans, the main debt we have is a bank loan with interest rate of 9% whereas the lifetime mge would be 6.5% and does take hefty portion our monthly income and should the two of us become one would be too much for that single income