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I am afraid that most
of the information out there about Equity Release is nonsense!! It is
a safe and easy way to release money but it is surrounded by bad
advice and ridiculous 'help' from those that should know better!!
True, EQ can be expensive to set up but that is because the rules
surrounding it demanding you take third rate advice are pointless!!
Too many companies are getting rich offering these. Why can I
mortgage my property or even sell it if I want to with little
problem?? But, you will start by being asked about EQ as to whether
your children know what you are doing!! From then on impertinence is
the order of the day and all for NOTHING!!
In 2000, I was working
at NPI in the quotations programming area when ITV ran a programme
about NPI's outrageously expensive % of home value option. I went
through the quotations and realised there was a serious mistake.
House price inflation was assumed to be 5% per year. But, try as I
might I could get no-one high enough up to understand this mistake.
In fact, the actuary in charge must have been the only person in SE
England who had lost money on a house in the previous 5 years!! I
approached ITV and told about what I had found out. And, yes, I also
told NPI that I had!! A short-time after my contract finished there
was an article in the Sunday Telegraph that proved that house price
inflation since 1950 had in fact been 5%!! IN REAL TERMS!! ie 5% PLUS
the rate of inflation of the same period. I took this to NPI and told
it that I considered it should compensate the people who had these
very unfair contracts. What happened I do not know but when I looked
into an EQ 7 years later lo and behold NPI was not in the game. It
allowed those working the actuarial section to take it over. And, I
found their option was still expensive. The MOST expensive at that
So, the first thing is
never take a % of value offer!! It should be noted that NPI had no
problem finding backers for the % option - it used Abbey National -
but had to fund the absolute value itself. That alone told me that
Abbey knew even if NPI did not (want to)!!
advice. You are
forced to pay for this by order of the FSA. When I approached it I
was told that full consultation was done before the rules were
created. Unfortunately, those consulted were all FROM WITHIN THE
INDUSTRY. And therefore biased
It is rubbish!! The main reason is
that the adviser is NOT ALLOWED to mention house price inflation. So
you will be quoted the compounding interest on the loan but only 1%
house price inflation to balance that. I currently have 25% of my
house mortgaged and provided that house price inflation is at least
1% I will break even, Over 1% and I still make money for my
Anybody who tells you
to downsize should be questioned. I always intended to do that when I
got to 60 but as interest rates dropped it became more and more wrong
while house prices still carried on their stunning increase!! If I
had downsized I would have paid off my mortgage and finished up in a
£250,000 house. Instead I still have the home now worth £685,000 on
which I owe £185,000!! And I have ALSO enjoyed travelling the
However, if the EQ is
to be given to your children for houses and you are NOT claiming
benefits then that is probably the answer!!
benefits. My adviser could not help with this - AS HE DID
NOT KNOW ANYTHING ABOUT IT - but said I was wrong with what I was
suggesting!! Well take EQ and keep the money for later or pass it on
to the family and you will immediately run up against the assets
cap!! That's pretty clear!! So, in order to avoid that run up debt
FIRST and then use the EQ to REPAY it!! That's allowable!! I accept
not quite so easy now that credit cards are not being so generous.
Though given how low interest rates are, I fail to see why!!
Why should someone come
round and almost TELL you to discuss the transaction with your children??
Why should compound
interest only be quoted on the loan interest but not on the home??
If you have been caught
by a % of property EQ, go back to the company that lent the money and
press for a refund or else go to the appropriate watchdogs and press.
It was a con in 2000 and if it still exits in 2020 they have had
plenty of warning!!
you need advice I would ask you to think about about why you need
this loan in the first place!!
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