Equity Release - is it worth it?

drcrowther

I am looking into Equity Release but wonder if it is a viable option.

I am 63, in my own home with no mortgage, financially pretty secure, but have no immediate family to bequeath my estate when I am gone.

My home is probably worth £200,000 and I suppose life expectancy to be 20-25 years, so it would make sense to be able to do things whilst I'm fit and able. So, is it worth looking at a Lifetime Mortgage of say £25-50k ?. Taking out a secured loan against the property doesn't seem to make sense as it means repaying the loan over the near future and is self-defeating in that I would like the cash now and everything to be settled upon my demise.

I would like to hear your thoughts, especially from anyone who has gone through equity Release.

NeilCr

I'm the same age as you live on my own and have no family at all. My will splits any inheritance between my current partner (we don't live together and have a very relaxed relationship ) and two of my closest friends.

I don't need to raise any money at the moment but would do equity release in a heartbeat if, further down the line, I wanted some cash. Life is for living and if that allowed me to do some things that I wouldn't do otherwise then I'm there

I would have a different view if I had family or a live in, serious partner

[Deleted User]

No No No. My Dad took out an equity release loan for a relatively small amount. He now has Parkinsons, stuck in an upstairs flat in Romford and can't move (and a stair lift can't be installed because he can't make material changes to the flat because of the conditions of the equity release scheme). Because the loan was taken out 20 years ago, there is no equity left in his flat.

Admitedly there was less protection 20 years ago.., but the interest rates are still high and can still build up.

booksurr

deannatrois wrote: »

No No No. My Dad took out an equity release loan for a relatively small amount. He now has Parkinsons, stuck in an upstairs flat in Romford and can't move (and a stair lift can't be installed because he can't make material changes to the flat because of the conditions of the equity release scheme). Because the loan was taken out 20 years ago, there is no equity left in his flat.

Admitedly there was less protection 20 years ago.., but the interest rates are still high and can still build up.

interesting post, thanks for sharing

like#2 I always assumed that equity release was perfectly sensible if you have no heirs and don't care enough about the local cats and dogs home to live out your old age in penury so they can inherit from you

NeilCr

I think I'd make sure of this

http://www.equity-release-centre.co.uk/faq/qa-42--can-i-still-move-after-taking-equity-release.htm

My friend has got equity release and is moving. I'm very happy in my house and have every intention of staying here. But you have to take account of possible change of circumstances - say I found the stairs too difficult later in life?

knightstyle

Rather than equity release look at an interest only mortgage, that is what we have, I am 71, my wife a few years younger, we pay the interest every month and the loan stays the same, it will be paid off when we eventually sell the house.

AnotherJoe

knightstyle wrote: »

Rather than equity release look at an interest only mortgage, that is what we have, I am 71, my wife a few years younger, we pay the interest every month and the loan stays the same, it will be paid off when we eventually sell the house.

Practically impossible to get these these days especially for the circumstances you outline / infer, e.g. Indefinite length. Or do you have a date by which you must sell ?

konark

You can only take about a quarter of the house value. then there are a couple of thousand pounds worth of expenses and interest rates are quite high, about 6% at the moment. Also some of the companies in this sector seem to be less than reputable.

To work well the value of your house would need to rise substantially, it's not so good if prices go down or flatline. At 6% your debt will double every 12 years, so if you take the maximum 25% and house prices don't rise in 24 years your equity will be gone.

Linton

konark wrote: »

You can only take about a quarter of the house value. then there are a couple of thousand pounds worth of expenses and interest rates are quite high, about 6% at the moment. Also some of the companies in this sector seem to be less than reputable.

To work well the value of your house would need to rise substantially, it's not so good if prices go down or flatline. At 6% your debt will double every 12 years, so if you take the maximum 25% and house prices don't rise in 24 years your equity will be gone.

In the OPs circumstances it doesn't matter that the equity has gone by the time they die, they will be dead and so won't care. We are in the same position of having no one who should or needs to inherit our wealth when we go and so there is no point in leaving a valuable asset. Much better for us to use the equity ourselves, and it has the added advantage that selling the house after we go becomes the responsibility of the equity release company rather than an elderly relative or a solicitor.

In our case the intention is to use the money to trade up rather than extracting the equity. We have consulted a mortgage advisor who tells that at our age about 30% of the equity of the new house could be provided on a lifetime mortgage redeemable by the sale of the house on death. Interest would be rolled up, so there would be no on going costs.

Modern lifetime mortgages don't have the restrictions described by the previous contributor but in any case we will be using a solicitor to ensure that our interests and flexibility of action are fully protected.

moneyistooshorttomention

What sex are you?

Firms are still currently paying women less than men of the same age. Hence I can't even contemplate equity release personally (being a woman) until such time as there is a law preventing them discriminating against women like this - as otherwise I'd be letting them treat me personally that way. No chance - I've got too much self-respect to allow myself to be discriminated against by getting less money than a man would.

anselld

moneyistooshorttomention wrote: »

What sex are you?

Firms are still currently paying women less than men of the same age. Hence I can't even contemplate equity release personally (being a woman) until such time as there is a law preventing them discriminating against women like this - as otherwise I'd be letting them treat me personally that way. No chance - I've got too much self-respect to allow myself to be discriminated against by getting less money than a man would.

So you would be happy if they just discriminate on the basis of age then?