Equity release taken in more than one 'chunk'.

Johns-dosh

I have a question re. equity release...

Let's say that a house was valued at, say, £150,000 and that allowed for an equity release of around £35,000.
If one took a part-release of say £15,000, and then went for the remainder after maybe five years, would the house be re-valued and the amount available for release be re-calculated?

Obviously, the point of the question is that the market value of the house would probably go up in that five years, allowing more equity release.
Also, if one did some improvements (using some of the money from the first part-release) that might make the house value greater as well.

So, what I'm thinking is that if a full equity release netted £35000 (for example), one done in two parts perhaps 5 years apart might net more (say £37,000).

Your_Hero

Johns-dosh wrote: »

I have a question re. equity release...

Let's say that a house was valued at, say, £150,000 and that allowed for an equity release of around £35,000.
If one took a part-release of say £15,000, and then went for the remainder after maybe five years, would the house be re-valued and the amount available for release be re-calculated?

Obviously, the point of the question is that the market value of the house would probably go up in that five years, allowing more equity release.
Also, if one did some improvements (using some of the money from the first part-release) that might make the house value greater as well.

So, what I'm thinking is that if a full equity release netted £35000 (for example), one done in two parts perhaps 5 years apart might net more (say £37,000).

It is possible but you may have to go back to the same lender, because a second charge is almost worthless to lenders in the equity release market, since the debt could easily snowball to well over the value of the house after 10-15 years.

xylophone

Be careful.

http://www.equityreleasecouncil.com/faqs/

since the debt could easily snowball to well over the value of the house after 10-15 years.

See above under No negative equity guarantee.

SallyG

http://www.equityreleasecouncil.com/faqs/

"What is a no negative equity guarantee?

If you take out an Equity Release Council approved equity release product, then your loan will come with a no negative equity guarantee. This is part of the Equity Release Council Code of Conduct for providers.

When you die or move into long-term care, your home is sold and the money is used to pay off the loan. Anything leftover goes to your beneficiaries. However, in the unlikely event that the value of your house has decreased significantly it would be possible that the value of your home no longer covers the value of the equity release loan. The Equity Release Council no negative equity guarantee, which all Equity Release Council members offer on their equity release products, means that in this situation the remainder of the loan would be written off, ensuring that whatever the future holds, your beneficiaries would never have to meet the cost of your loan."

Johns-dosh

Your_Hero wrote: »

It is possible but you may have to go back to the same lender, because a second charge is almost worthless to lenders in the equity release market, since the debt could easily snowball to well over the value of the house after 10-15 years.

Ok, thanks. I had assumed that it would have to be with the same lender.
The question is, basically, if an equity release is done in two parts, is the house revalued for the second part and is the amount of equity release adjusted accordingly?

John

Johns-dosh

xylophone wrote: »

Be careful.

<snip> links not allowed

See above under No negative equity guarantee.

Thanks. I understand the issue of negative equity. I don't see, to be honest, how that relates to my question, which is...

Basically, if an equity release is done in two parts, is the house revalued for the second part and is the amount of equity release adjusted accordingly?

jamesd

Why not choose one of the products that allows you to draw money on demand up to a set limit? You would only be charged interest on the money actually drawn.

Yes, new values should be used, for both property value and your own age, which is one of the more critical factors in deciding how much you can get.

Proxy

To actually answer your question without moaning about the product:

This depends on the product you have chosen. If you choose a drawdown type product (around 60% of plans are) then you will have a "reserve" which doesn't get charged interest until it is drawn. There is no advice required on the additional withdrawals but your property value does not get changed.

If you take out additional borrowing on the contract then your property will be revalued but you must be re-advised, with appropriate charges applying (advice, valuation, legal etc) and it will be subject to enough funds being available given the outstanding balance and your maximum LTV at the time. This must be with the same provider as your original contract.

Johns-dosh

@Proxy,

Thanks for that, I think I understand now.

Re. moaning, I guess you are not a fan of equity release?
What else can one do though to get access to some of the cash tied up in the house?
Downsizing is not really viable as I would end up in a cluster house or a flat or even dog kennel!. Downsizing is fine if you are in a large family home and can downsize to a more modest but still reasonable house, but that'snot where I'm at.
I also don't have anyone to leave an inheritance to so that's not an issue.

Proxy

Johns-dosh wrote: »

@Proxy,

Thanks for that, I think I understand now.

Re. moaning, I guess you are not a fan of equity release?
What else can one do though to get access to some of the cash tied up in the house?
Downsizing is not really viable as I would end up in a cluster house or a flat or even dog kennel!. Downsizing is fine if you are in a large family home and can downsize to a more modest but still reasonable house, but that'snot where I'm at.
I also don't have anyone to leave an inheritance to so that's not an issue.

I am a fan of equity release and believe it has a strong part to play in the world of retirement planning.

I only say it because you can rarely post a thread on the subject without the first few posts imploring the person to think of alternatives, as if they haven't thought of it already.

jamesd

You could also consider changing where you live. Houses can be had for well under £60,000 in say Hull.