Equity Release

bobthesod

Seen these ads on TV where you, in effect,take out a mortgage, that isnt paid off until the last one dies!

Ok had a look at them, and to be quite honest, son will still get a good wedge, when the house is sold,and we get a complete revamp and dont have to worry about redecorating again!

One poster on here went apoplectic on this and said don't do it and then mentioned 'release equity' Isnt that the same? Son says go for it.
The only query i have is as this is a money saving forum. is the up frnat costs of 650 for solicitors and a 1499 reference fee ( now that does stick in my craw on paying that !!! just for taking a phone call and explaining what an intelligent chimp would understand.
Are there good companies out there who might do it for less or are they running a sort of 'cartel'?

so MONEY saving Bods. step up to the plate please!

leon103

Is there any reason why you are doing this? Other than to give your son some money? Does he need it now?

[Deleted User]

I don't know what you have read or been told. All I can tell you is the situation my father is in. He has Parkinsons very badly now (is 82), living in an upstairs flat with steep steps. He can't even put a stair lift in because he used an Equity Release scheme and one of the clauses in the contract is that he can't make any alterations to the flat. He signed up to the sort of scheme that leaves nothing left when the house is sold. So he is very stuck and now has few options, when he needs them although it has to be said that he was made redundant and did this so he could keep the flat. He also went on a very long cruise, but I have to ask if it was worth it now. If I could I would have advised him to look for another option. Its hard to see your father ill and trapped.

Get hold of a contract and read it very very carefully. Get a solicitor to explain it to you. If you have to pay this money first, look for another company.

The fact that you have to pay fees like that without really seeing any paperwork (guessing here) indicates to me that this might not be a very good scheme. If I had been there when my father decided on the equity release scheme, I would have been screaming 'no' so loud I would have deafened him.

Are there no other options like moving to a smaller property? It might be easier for you in the long run if you really want to have a pot of money available. Equity Release schemes aren't actually there for you, they are there so the company can make a profit, often an extortionate one. Think carefully.

Cakeguts

I would suggest that if you are thinking of doing this that you move to a cheaper property instead.

kingstreet

Spend time.

Research carefully.

There are products where you can pay some or all of the interest. Interest roll-up is not the only option.

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

Get independent financial advice.

AnotherJoe

deannatrois wrote: »

I don't know what you have read or been told. All I can tell you is the situation my father is in. He has Parkinsons very badly now (is 82), living in an upstairs flat with steep steps. He can't even put a stair lift in because he used an Equity Release scheme and one of the clauses in the contract is that he can't make any alterations to the flat. He signed up to the sort of scheme that leaves nothing left when the house is sold. So he is very stuck and now has few options <snip> Its hard to see your father ill and trapped.

Why not just put the stair lift in anyway. The ER company isn't going to know, and if there's nothing left at the end there's no comeback even then.

bobthesod

Thanks for the input


Deanna I cannot comment on the deal your dad did, but as the money is for improvements alterations, i dont think that the lenders will get shirty about bathroom, kitchen, d/glazing etc

We have got all the paperwork and it seems ok.

Son will get the lot when we both fall off the perch.

Just want to get the house back to a reasonable state and improve it for our old age.

The one we have looked at is a small ( compared to the current selling price) 'mortgage'

Bearing in mind it is just pension income the option of just letting it roll up seems a good idea. It may not to some people but to us it is.

To give you a heads up from age concern

Sols fees 650
finanacial advisor fees 1499 ( thats the amount that i think is a bit of a con a lot for little work IMHO) And these two can be added to the loan
Borrow 12500
Total 15k

options can pay back nothing and on sale of house a total of 30k is paid back ( less than 10% of current house value)

OR pay off up to 1500 pa. so the 30k payback is reduce on second death
The interest is 3.95%

House is still 100 % ours and the outstanding amount must be repaid should we move, and as the only way that is going to happen is for Euromillions to come up and with 30m in the back pocket who cares?????
So as i see it it is appears to be a 'second mortgage' with no monthly payments and no term

Or have i got it all wrong

And NO we DO NOT want to downsize thanks


No spending on holidays, or new car or car no giving kids cash up front

Just want cash for new bath and home inprovements OK? and still live within the means of our pensions

So what am i missing?

davidmcn

Whose solicitors are those? The lender's? Do they insist on you getting independent advice? If so then add (probably) a similar amount for your own solicitor. Plus outlays, I expect. So you're looking at upfront costs of say 20+%, plus the interest on it if you add to the loan.

I would have thought there were cheaper ways to get the money. Can't son lend/give to you instead? Would seem to be the (collective) money-saving solution.

[Deleted User]

Yes I would strongly recommend seeing if your son can get a loan for the £12,500. He can then put a charge on the house to ensure whatever happens (care fees later on in life etc) he gets that money back or perhaps you could pay him a much lower sum than that 1,500 per year amount. That would be about (guessing) £115-120 a month if you paid back the 1,500 a year. Or you could say you'd pay him half that which would be manageable hopefully.

But you probably need to get quotes for what you want done to the house first (if you haven't already), and find a good builder so its not money down the drain.

Or you could just move to a smaller place where all the work is done if you could bear the hassle of moving. It can be quite cathartic getting rid of built up 'storage' items. You wouldn't have to do it in a rush. You would probably have to do this anyway if the refurb is extensive. I know how much stuff I throw out for a kitchen and bathroom refurb! You have to make room for all the bathroom and kitchen stuff!

Lots of assumptions here of course, so please forgive if I am in error.

bobthesod

Oh dear

I wish people would actually read the question instead of telling me what they would do!

I just wanted to know if the fees that Age concern quote ( 1495) is the market rate to set it up?

That is all

What happens next , well we shall look further into it. I dont want to sign up and then find that i could have got the same type of deal for 1k (fees) less

I have looked into the conditions and they are#house is still 100% ours

Borrow 12500 as equity release
sols fees 650
Financial highwayman lol 1495
total borrowed say 15k

if NOTHING paid off the total amount repayable 30k
however we have the option to pay off an amount each year ( max 1500.so the 30k could reduce...BUT it will not increase

House is worth an example 250k at todays value

So if we both die tomorrow the house sale would be 250k-30k
leaving 220k

House prices are rising by say 5% per year

so in 7yrs time the house would be worth say 335 leaving him 300k

15 year, should we live that long it will be 494k- the 30k so who really gives a monkeys?

All i wanted to know is are those set up fees normal yes or no

Or to put it another way


My local supermarket sells cow butter at 5.00 per kilo

Can i get the same cow butter cheaper in another supermarket

hope that helps

AnotherJoe

From what Ive read the setup fees are high but the interest rate is very low and with these deals a low interest rate trumps most things due to the "power of compound interest". Most of the moans you see about ER here are from people whose interest rates are high and the debt spirals out of control.

However, please dont complain because people have come up with other solutions, I'm sure you'd moan here if you just got an answer "yes thats a good deal for ER" and then it turned out you could achieve the same ends far cheaper, lets say saving you £10k overall, but no one mentioned it on the grounds they are just answer robots mechanistically answering only exactly the questions asked.