Equity Release guide discussion

Keep_pedalling

Savvy_Sue said:

ULoisLondon said:

I have been advised to consider releasing equity from my quite expensive home (no mortgage) using a Lifetime Mortgage, so I can top up my pension.  I am 75.  I don't need a lump sum, just some monthly (or annual) income, from which I could maybe pay some interest if that was a good idea.

I could approach my only child (married with own children) who is in a wellpaid, hopefully secure job, and suggest that an 'interest only' mortgage  coule be taken out on my flat (they have no mortgage, probably have savings too, and don't appear to have any expensive plans) with my child and I as joint owners maybe, to release some funds (though that would be a big lump which neither of us actually need)

I'd appreciate advice about whether this might be a workable idea, rather than me taking equity release as a Lifetime Mortgage.  Is there an alternative which would give me a regular pension top- up that I've not thought of, against the value of my home?

I'm unclear what the Inheritence Tax implications are in any of these cases, but that is probably a side issue and anyway not something I'm too bothered about because I won't be here!

I'd suggest both of you taking independent advice on this: it's not just inheritance tax, there are also potential capital gains tax liabilities when your flat is eventually sold (assuming it won't ever have been their main residence). Plus wellpaid secure jobs can vanish like the mist, and good health and stable marriages can disintegrate. 

There need to be a lot of 'what if' questions addressed. 

There would be no IHT or CGT issues on a loan of this type, but the issue of the lender running into financial difficulties in the future is a very real possibility. 

Gerry56

Lois - I say this in a completely amateur but I like to think, well read, manner.
I like Equity Release as a product but there are constraints.  For one, you say joint owner with your son.  If he is not 55 you won't be able to get an ER. What's more there are usually penalties if you want to settle the lending before both parties die or go into long term care. So if after your passing your son wants to sell the property (as joint owner) he could be hit with exit fees.  Unless of course you meant for your son to take a mortgage and buy part of your home.  If you simply give it to him (depending on how much) there could be questions later over what is called deprivation of assets.
As there are lots of regular mortgages for, shall we say, more mature customers, that might be a better route to "release" equity from your home.  You will have no choice over interest repayments (as you would with ER) but you seem happy with that idea.  You may also find you are able to take a bigger mortgage than ER.  I would also say, as it may be difficult to get a draw down product, it might be best to take as much as you can and put the balance that you don't need immediately into term accounts where you would be able to offset a fair amount of the interest the mortgage would generate.  Even with ER, where draw down is available, you may get a good interest rate to start but these can increase on subsequent lending. 
The other thing that struck me, you give the impression you son is financially comfortable. Could he not help you out without borrowing?, even if you were to pay him "interest".  It would be the cheapest option all round.  Perhaps that's what you meant about sharing the property?

Finally, I would echo what others have posted. Have a word with an Independent Financial Adviser, but keep in mind they generally only get paid if you buy a product.

Marieeliz

I paid 90000 for a shared ownership bungalow last July. I sold my original home for 131500. I now wish to return to the place I moved from I have seen a property I like for £130000. I was thinking of keeping my savings. Using the 90000, as a deposit and purchasing this property. I am over 80 with no close family. What can anyone advise please? Was thinking about an Lifetime mortgage any better suggestions. I could afford to pay some capital off.

missile

It can be difficult to sell shared ownership properties. What are the T&Cs?
There will be selling, buying, removal and other costs.
Do you have sufficient income to qualify for £40,000+ lifetime mortgage? It might be best to explore this first. https://www.which.co.uk/money/mortgages-and-property/mortgages/types-of-mortgage/retirement-interest-only-mortgages-explained-a9z9k0h9lbfy

Cannymoney

Does anyone have experience of transferring an equity release loan to a new property?  I am clear about what fees are involved. However, the E R company tell me they do not approve a property until you have offered on it, been accepted, applied to the ER Co., had a valuation and application accepted.  I cannot imagine a seller or estate agent regarding me as a desirable purchaser given what looks like several weeks of delay and uncertainty, possibly having to withdraw offer if ER Co. don't approve property.  If I sell before buying another property, the E R Loan is automatically terminated, with all relevant charges including a hefty early repayment fee.  I would then not have a property to request E R against and a much smaller amount to buy another one.  I am grateful for what I have but have made huge sacrifices throughout my life to have financial security in old age and with possibly only a few years of my life left it does not make sense to have all my "assets" in a property and be struggling to pay bills, buy food etc, let alone have a few treats.  I could of course stay where I am but due to change of circumstances would like to move nearer to family and friends in another area. 

rabialiones

Nick_Lovell said:

lending is available in this sector from around 10 different lenders and over 300 products. To my knowledge this is the only form of lending options available - happy to advise further if  I can.....

i was thinking of shared ownership, where the other partner would be able to pay a set amount in monthly instalments, without having to take out a mortgage, from banks/building society.
i beleive it would be like a private mortgage, where monthly amount would be received to top up income, as one of the previous posters has mentioned

Nu

MSE_Rosie said:

Equity Release guide.

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The Equity release guide is clear and informative, really helpful!  It would be marvelous if there was a similar calculator for this as for the 'Best mortgage', or if the best mortgage calculator could be adapted to include lifetime mortgage or equity release as an option. 

Gerry56

"Can you tell me why a property with a condition on the title deeds stating !!!8220;property has to be sold to some who has worked or lived in the county for three years!!!8221;. Cannot get equity release."

It's possibly because the ER company may need your estate to sell your home to settle your debt when you die, and you have a restricted market.  

Ridgeback01

Good Morning.. has anyone used any form of equity release to reduce inheritance tax liability ? I do not want to move from my home and am lucky enough to have no mortgage, but my home is quite in excess of the £325,000 threshold to pay inheritance tax and has money I could use in its equity for a better life now tied up in it. I have two sons who I want to help in my life time and leave my estate too,   I am unwell with a large amount of brain tumours so have a limited life expectancy of between roughly 5-15 years depending on how treatment goes, but can change, so looking to release money that would otherwise go in tax on my death.  Thank you for any advice.  Kate

Nick_Lovell

Hello Kate, I have undertaken a release for a client that wanted to reduce their liability and certainly this is not an issue.  There is always a lot of confusion around gifting but the bottom line is "People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death".  This is straight off the Gov website which is a good resource for understanding this more. My client had a £1m estate and took out £375k to gift and use for their own purpose, so now the estate value is reduced by the £375k + the compounded interest at the time of death, and will reduce the IHT.