Lifetime Mortgage

Onlooker

The only release from losing a great deal of your estate when it is borrowed against with a Lifetime Mortgage is house price inflation.If this proves not to be adequate over your lifetime then there will be a marked effect on you future.
There has to be an average 3% rise ever year just to raise enough monies to cover your loan plus compounding interest.Anything less will also diminish your estate
The figures for the past year show an average price rise of £834.00.Anyone with an average loan of say 25% would require an Increase as above of £6435.00 i.e 3% just to stand still .Consider.

ACG

People are not doing equity release for a profit or to end up in the same position as when they took the money out. They know full well the equity in their home at least in part is going to go. They are doing for a reason, which could be as serious as losing their home.

Onlooker

As well as looking at the posts on getting involved with a Lifetime Mortgage look at the Tonight program on the ITV hub last Thursday night 7.30 which discusses Equity Release and its implications from differing angles and may help to make your future financial decision the right one for you and your families.
One major issue not brought forward is house price inflation which in the current climate should not be ignored,Consider

Onlooker

Look to the Tonight program on ITV Hub 7th.Nov.Plenty of info with regard to Equity Release but why no mention in depth of compounding interest and the effect on you future holdings,early exit fees when you want to move away from this element or borrowing which could include Downsizing.Lack of house price inflation discussion the dangers of lack of any signs of that increasing for an unknown number of years in your future.Consider.

Onlooker

A recent article in the paper looks at what they called the bank of Grandad & Grandma,pointing out the rising number of people are helping their siblings onto the stepladder to owning their own first property.A very good thought .Unfortunately the danger of deliberate deminishing the value of their estate is not pointed out.If someone has to go into care and is found to have gifted monies thereby reducing their contribution to their care homes costs these monies can be claimed back from whoever was given these monies.A very difficult trap some people could fall into.Consider.

Onlooker

There are only 2 guarantees attached to Lifetime Mortgages.One is that you will always own your own home.Legally yes.The other is that the industry will not sue you for any monies due over and above the said value of your home.This could happen without the help of house price inflation which cannot be guaranteed
At this moment this is running at less than 1% whereas in most borrowers cases it has to be over 3% ever year to stop any reduction in the value of anyones estate and approaching that second guarantee.
There are alternatives to be had at this time of unknown outcome from banks ,building societies etc.Consider

Ray_Singh-Blue

Allow me to summarise the last 18 pages.

1. Onlooker took out a £45000 loan on their house.
2. They are not making any repayments or paying any interest on the loan.
3. So the amount owed is getting bigger and they don't like that very much.
4. They'd like people reading this thread to think carefully before doing the same thing.

Have I missed anything out?

Onlooker

We have pointed out that the reasoning anyone got convinced that getting involved borrowing against their paid for property would in some way be protected from losing a percentage of the value of said property with annual house price inflation.
This has and will reduce that protection only if and when this figure becomes at least 3% per annum for the lifetime of any loan involving compounding interest.Not guaranteed by any provider.
The market for making a loan is full of offers albeit requiring regular repayments but at a cheaper rate than the equity release industry.
We have provided our opinion and have received the industry' s over the said 18 pages read and get a 10,15,20 year future quote on your own estate.Consider

Ray_Singh-Blue

Thanks onlooker. So in a nutshell:

If taking a no-pay loan against your house, don't assume that your house will rise in value faster than your loan does. Get proper advice and projections?

Onlooker

With regard to house price inflation it is impossible to get a projection at any time and now with said inflation running at less than 1% it could not be more important with the outcome of the latest politics unknown.
A 3% increase is needed just to save the equity in your property on the date you get involved in a Lifetime Mortgage with compounding interest been charged.You may stay with enough to pay of your loan.Get 5/10/15 year projections on this from said proper advisors.Read any 5/6 of the 18 pages to look at and check figures and our insight.