Free up equity

merrydance

We took out an equity release on our property. Some schemes allow you to pay off the interest every month so the amount you owe is never more than you borrowed. The interest rate is 5%. Also we pay a bit over the of interest due every month so we can chip away at the amount we borrowed If we stay here 5 years carrying on doing this, they do not charge an early redemption fee. We went through our financial adviser to do this. There are some good schemes out there for equity release, go through a trusted broker. We got into a mess with credit cards, stepchange recommended this route for us, although the one they offered was much less favourable than this scheme.

EssexHebridean

jon001red wrote: »

Hi all,

My wife and I are currently jointly earning about £35,000 per annum and are subsequently constantly flat broke and have a debt of around £7,000 which we are struggling to pay bit by bit. However we have equity of around £200,000 on our house. Could we use this equity to clear our debt and have a bit of a nestegg (moving house not really an option)? I have heard about Equity release but I am not sure about any pitfalls.

I would be grateful if anyone could give me some advice on our situation.

Many thanks in advance.

Jon

OK - on the face of it at least your income is NOT the reason you're constantly broke - your outgoings provide the key to that.

Before you explore ANY other possibilities, the first thing to do is to set, and use, a properly worked out budget. That will tell you where you're spending money that you can make savings on, and will also ascertain what you SHOULD have free at the end of each month,. From there you can work out where that money is going.

As others have said - first step - SOA (Statement of affairs) - you will find the link in the "sticky" post at the top of the board. Any form of turning unsecured debt into secured is a horribly bad idea - and doing this before you've actually got to the root of the problem is a recipe for disaster.

hohum

I just want to note that our joint income is £30k a year, and we definitely aren't flat broke (we don't like in a particularly HCOL area however, and while we carry debt it's to take advantage of 0% purchases and is backed by savings). I do encourage you to do an SOA as suggested, as I suspect that's where the answers lie. Expenses can vary (and be reduced) and will contribute to how much you feel to be flat broke! Who is your household also makes a different (no kids in ours). Having that information will help people give you more useful advice.

Ilona

Statement of Affairs. You need to find out why you are flat broke.
http://www.stoozing.com/calculator/soa.php

Ilona

sandra_doggett

hi, does anyone know if it's worth lodging a complaint with a equity release company with regard to a scheme "sold" to my parents. It's criminal the scheme they were sold and I can't believe they understood what they were signing up for and what the consequences would be. they have both recently passed away and it's only now as executer of their wills, that I have found out the information regarding the scheme they signed up for in 2002.

Ilona

sandra_doggett wrote: »

hi, does anyone know if it's worth lodging a complaint with a equity release company with regard to a scheme "sold" to my parents. It's criminal the scheme they were sold and I can't believe they understood what they were signing up for and what the consequences would be. they have both recently passed away and it's only now as executer of their wills, that I have found out the information regarding the scheme they signed up for in 2002.

Hello Sandra. You have tagged your question onto someone else's thread, you would be better starting your own thread. Although this one is about equity release, it's in the Debt Free Wannabe board. I suggest the Deaths, Funeral's, and Probate board would be best suited to your query.

It's quiet at the moment, Bank Holiday weekend and folks have gone out. Be patient, someone will be along to help. I'm sorry, I can't answer your question.

Ilona

fatbelly

If the company was a member of the Equity Release Council (I think this was previously known as SHIP) you can complain to them

http://www.equityreleasecouncil.com/home/

Otherwise, and in any event, there's the Financial Ombudsman Service

But it seems your parents were both allowed to live in their property to the end of their lives following their equity release. Is the company trying to claim money from their estate beyond the value of the property?

phillw

fatbelly wrote: »

However, I suspect the OP is considering remortgaging, which does have drawbacks in that you are moving debt from unsecured to secured, making it more likely to cause problems if you hit financial difficulties.

The unsecured debt is pretty small though, so it's unlikely to make a huge difference to repayments. You can't just make unsecured debts disappear if you have equity in your house. They can apply to have a charge put on your property for the unsecured debt if you default.

IMO more of an issue is what interest rate and application fee you'd have to pay for the £7000 as it's quite low for the mortgage company to deal with.

The thing that worries me the most is that he wants to borrow money to have a "nest egg".