Should we go for equity Release ? 30 November 2018 at 9:35PM in Mortgages & endowments 6 replies 830 views

DeccaL

My wife and I are in our 70's and don't want to move. We have a son and a daughter who will benefit when we are no longer around.
Our house has been recently valued at £400000 and based on its purchase in 1986 at £50000, using web based calculators in 15 years it should be valued around £650000.
Age Partnership have been sending me offers of £150000 equity release, so also using web based calculators and information on MSE it would seem that in 15 years the amount owing to them will be £300000.
This would leave £350000 to our son and daughter & families.
I'm thinking about drawing down the £150000 and putting £50000 into Premium Bonds for both myself and my wife. The other £50000 would give us some nice holidays over the next 15 years !
When we are no longer here, and the house is sold, £300000 would go to the Equity Release company, leaving £350000 + the £100000 in Premium Bonds, giving our on and daughter £450000 between them. Plus of course any winnings made with the Bonds over 15 years !
Of course we are hoping to be here longer than 15 years, so will have to adjust costs accordingly !
Does this sound reasonable, or am I looking at it through rose coloured glasses !
Any comments and thoughts would be appreciated - thanks !

Browntoa

You can opt to pay interest on the lifetime mortgage ( as opposed to the consumer friendly "equity release" tag )

That retains a bigger slice of the equity , use part of the cash released to pay interest

https://www.stepchange.org/how-we-help/interest-only-lifetime-mortgage.aspx

Thrugelmir

Why do want to withdraw a £100k when it's going to cost you a £100k in interest. Unlikely to make that amount in wins from premium bonds.

If you were going to spend the money on yourselves on a round the world trip. Then I'd understand the logic. As your children are going to benefit very well in any event.

tacpot12

Some Equity Release schemes allow you to can drawdown just the amounts you want, as and when you want to, and so the interest only accrues from the point you borrow the money. So you could sign up for the equity release, and just withdraw the amounts you need for the holidays you want. This will leave the maximum amount of equity in the property.

I think you are looking through rose-tinted spectacles regarding the future value of your home, but if your son and daughter don't really need the equity from your house, I would definitely consider equity release in your situation.

Ibrahimovic786

Top broker please ???

AnotherJoe

I agree with the other posters about your plans.
Why would you borrow £100k at 5% just to invest it at 1.3% ???

I also agree you are looking at rose tinted specs in regards to
Value of house in the future
Your future flexibility to be able to move or downsize
Your health.

You also don't say what the real reason for the ER is apart from £50k for holidays. Is that really all you need ? If so then just use ER for that or a bit more to allow for the £1.3k a year extra income - only £100 a month. Do you actually need that ?

Ps what do you think your kids will think of your financial acumen when after your death or or perhaps before when they are trying to get one or other of you in a better accommodation by selling up, they find you've got £100k in premium bonds but that's only there because there's a corresponding £200k debt ?

enthusiasticsaver

I don't think it is a good idea. Paying £150k in interest to have a few nice holidays seems crazy. Investing in premium bonds gives very low returns. What if one of you needs care and you need to liquidate to pay for it? There is talk of house prices reducing by up to 33% post Brexit so assuming the value will rise is not a certainty.