Equity release

Caz55

Hi I don't post much on here at all but always take a look every day . I was wondering what people thought about equity release , I feel dead against it because I think it is an expensive way of borrowing money . My o/h is all for it and we are having a few issues about it as he would go for it tomorrow .

AnotherJoe

More details needed. There are pros and cons,

Caz55

We are both in our early to mid sixties my o/h wants to use the money for luxury things Like holidays and a newer car on the strength when anything happens to his mom he will have some money to pay it back. We have grown up children so do have someone to leave our house to .

AnotherJoe

OK, so he wants to spend the inheritance in advance as it were, whilst you can enjoy it. Not much point getting a whacking big inheritance if you cant enjoy it because you are too old and frail?

Nothing wrong with that, but whats Plan B if in ten or fifteen years time mum needs five years of care and the inheritance is wiped out by the fees?

You have to be very careful with ER because the debt can accumulate alarmingly, so you either need to understand that and plan for it (even if just mentally, eg really understand that the (say) £50k you borrowed will be £150k at some point and maybe teh kids get nothing) or take out ER that you can pay the interest on monthly to keep the sum borrowed at the initial level.
ER in your early 60's will be a very expensive way to borrow so you'll have to really want those holidays etc.
I take it significant downsizing is impractical / out of the question for other reasons? That is "DIY Equity Release".

Caz55

My mil is in her mid 80 s and we have just put her house in trust ( not sure how that will work) . It is really not knowing how long this equity mortgage will go on that is what bothers me .if 25 thousand was taken out now do u know roughly how much that would be in 5 and 10 years .

Mojisola

Caz55 wrote: »

We are both in our early to mid sixties my o/h wants to use the money for luxury things Like holidays and a newer car

Will your current house suitable for you as you age and maybe develop mobility problems? It could be very difficult to move if you've signed up for ER.

kingstreet

What about an interest-only product instead of interest roll-up?

£25k at (eg) 5% per annum would be £104.16 per month. Would the kids pay that for you to prevent erosion of their inheritance?

Caz55

I just think wait to have a new car trouble is he loves his cars we have enough savings for hols for a few years so I don’t see the reason to go down this road yet .

Mortgage_Adviser

Caz55 wrote: »

We have grown up children so do have someone to leave our house to .

You can think of this that way and I am not saying it is wrong.


But if you need to got to a care home in the future and you do have a lot of equity in your house, the council will take it.


If you you don't (because you have released the equity and spent it) the council will provide you the care for free.
So would you rather spend money on your enjoyment or on a carehome costs which otherwise you could've had for free?


Of course if you chiildren would be willing to care after the two of you without needeing the care home this would be different situation.

Mojisola

Mortgage_Adviser wrote: »

But if you need to got to a care home in the future and you do have a lot of equity in your house, the council will take it.

No, they won't. If you have an asset, you will use it to pay the bills in the care home you have chosen.

If you you don't (because you have released the equity and spent it) the council will provide you the care for free.

But it's very unlikely to be the same standard of home.

So would you rather spend money on your enjoyment or on a carehome costs which otherwise you could've had for free?

Or would you rather have a choice about where you live if you need care in the future? If you don't need care, then there will a nice inheritance for your children.

Mortgage_Adviser

Mojisola wrote: »

No, they won't. If you have an asset, you will use it to pay the bills in the care home you have chosen.

if we are not talking about very expensive London property above after 30k PA(Assuming nursing is NOT required) in carehome per person there will be nothing left of the inheritance very soon.