Equity release - the long-term norm?

Damian_the_Actuary

Hi

People aren't saving enough to be able to maintain their lifestyles in retirement.

We remortgage our homes during our working lifetimes to access funds when we need them and I don't see any reason why we shouldn't use our homes as a source of income in retirement.

Our homes are one of our most valuable assets, we spend a lifetime paying off the debt, to me it then makes perfect sense to then draw-down on the value in retirement using equity release products.

I don't understand why many more people aren't doing this.

I know some people like to leave a legacy for their children but with life expectancy increasing, does your 60+ year old child really need/want your financial assistance when you pass way?

Long-term care costs can be managed through insurance products.

Can someone please help me understand and explain why this isn't appropriate for homeowners in retirement?

PlutoinCapricorn

MSE does not officially offer equity release advice for much the same reason that they do not discuss which are the best payday loans: both are seen as a last resort, to be avoided.

Damian_the_Actuary

I don't think that you can simply ignore the fact that the vast majority of people are going to be retiring with insufficient savings (particularly those without DB benefits). Agree if you've got savings then no need to use equity release but I don't understand why it has the taboo of payday loans! (which is kind of the point I want someone to help me understand)

PlutoinCapricorn

I suppose it is the huge amounts of interest that must be paid, together with depriving children of their inheritance.

If there were any good deals to be had, they would be highlighted on here.

PlutoinCapricorn

This is a rather restrained article on ER, and it says:

"So you won't find 'best deals' on this site, as there's not one I'd be happy to suggest"

http://www.moneysavingexpert.com/news/protect/2010/06/should-you-equity-release

PlutoinCapricorn

A discussion:

https://forums.moneysavingexpert.com/discussion/comment/33810693#Comment_33810693

Damian_the_Actuary

Thanks but still struggling to see why this is so bad. The only negative I see is the loss in inheritance.

I wouldn't want my parents struggling through retirement to provide me with an inheritance when they die and I'm 60 and don't think many others would either (I hope!).

I think the reality is that there is a whole generation of people who will retire in the next 15+ years who will have to use this 'last resort' as they've simply not saved enough and the alternative is reducing living standards which for many will be living in poverty. I think equity release will become the norm.

I've only done about an hours reading and happy for someone to explain why I'm completely wrong, but not really seeing it at the moment?

xylophone

While regulation is much tighter now......

http://becarefulwhatyouwishfornickwallis.blogspot.co.uk/2014/09/the-sam-scandal-bbc-inside-out-south.html


But a regular poster is perfectly happy with her product.

https://forums.moneysavingexpert.com/discussion/5230007 post 7.

PlutoinCapricorn

I once looked at a chart of how much would be owed at the end after all the interest had been accumulating, and it was horrific. I would spend some time with Google to get some facts and figures, and I would concentrate on the anti material.

Are you by any chance involved with ER products?

Linton

If there is no-one to inherit one's wealth and the value of one's house could usefully be used whilst one is still alive some form of equity release seems perfectly sensible to me. Even a bad deal would give one more money than nothing.

That is what we are planning to do in our old age - use our spare wealth to buy the best house we can afford in the best location with the aid of the maximum possible lifetime mortgage. The mortage company can have the lot when we have no further need of it.

PlutoinCapricorn

Freecall said:

"The problem is with both equity release and timeshare is that these schemes, while sensible in themselves, have been hijacked by sales driven organisations and individuals who load huge costs onto the basic product."

This was what I meant.