Next Mis-selling scandal looms

bostonerimus

As a matter of principle I avoid loans, equity release etc. I hate to pay anyone interest and for me financial independence means not having to worrry about paying anything to loan or mortgage companies. However, habits of borrowing to fund a lifestyle learned while working are often taken into retirement and that can be finically dangerous.

reeac

Not sure about being naive ....I'd just like to level the playing field, given the amount of advertising of ER in the Press.

Linton

dunstonh wrote: »

Indeed they do. It is called equity release. it is just one of the variations that exist today. However, the previous poster was saying those mortgages are the next missale. He was saying they should take out residential interest-only mortgages instead. Not equity release.

Is there any difference for practical purposes other than the criteria for ending the loan? ER being more appropriate for a retired person who is unlikely to have more liquid assets available near end of life to repay a martgage than were available early on.

Linton

bostonerimus wrote: »

As a matter of principle I avoid loans, equity release etc. I hate to pay anyone interest and for me financial independence means not having to worrry about paying anything to loan or mortgage companies. However, habits of borrowing to fund a lifestyle learned while working are often taken into retirement and that can be finically dangerous.

I do not understand why leaving behind an asset that possibly represents more than half your wealth is better in principle than making arrangements to spend some of it. It could be justified if you wanted that wealth to be passed onto your decendents but in other circumstances possibly not. In some circumstances it could be dangerous in others less so.


In our circumstances we used ER to enable us to trade up whilst retaining the flexibility given by significant investment holdings. Over time inflation should steadily reduce the risks.

dunstonh

reeac wrote: »

Not sure about being naive ....I'd just like to level the playing field, given the amount of advertising of ER in the Press.

I do have to agree that what advisers are expected to do vs how you see providers advertise is a world apart. Advisers are all "last resort" option and adverts are all go for it.

Is there any difference for practical purposes other than the criteria for ending the loan?

There probably shouldnt be but there is. Residential mortgages have different regulation and requirements to equity release. The MMR virtually killed interest only off apart from buy to lets or existing repayment vehicles.

It used to be said that mortgage lenders expect to be paid back in 25 years. Whereas equity release could go on for 40 years. That is why the insurers are more active with equity release than banks or building societies. Banks are all for now. Insurers for the long term. I personally dont think it should make a difference today as mortgages now creep to 30+ years. However, it does.