Equity release

[Deleted User]

Mordko, every situation is unique. Friend owns  and happily lives in pleasant bungalow in nice area, value circa £ 100 k.  Not a lot of options to downsize considering buy/ sell and other expenses involved. Wouldn't be much change left. Equally to sell and rent is not attractive as capital would be eaten by rent. Inheritance is not an issue. Equity release of some form may be suitable when or if required. Regards

[Deleted User]

westv said:

Deleted_User said:

Its a very expensive way to borrow.

Far more efficient to sell the house and rent or to buy a cheaper property. 

Is it? Even when you end  up paying quite a few hundred pounds a month in rent?

Yes. You need to offset rent against returns on your capital (total value of the property) which would be invested. And the cost of running the house you own often gets overlooked. 

House ownership is a lifestyle choice. Great if you can afford it.  Which only makes financial sense if you have a lot of other assets.

Dandytf

Malthusian said:

Dandytf said:

westv said:

If we ever do go for equity release we would definitely go for one where we pay the interest back each month. 

Though no where near Equity Release age group, I recently visited Natwide 'Later in Life' aka  equity release products.
Very disappointing that their 'no negative equity guarantee' option, isn't included in the 'Capital and Interest' paying choice.

Is that a retirement mortgage with a fixed end date rather than a whole-of-life term, which is what most people think of by "equity release"?

A no negative equity guarantee is required to comply with Equity Release Council standards and I'd be very surprised to see an equity release (whole of life loan) product without one.

For non-equity-release loans, a no negative equity guarantee isn't common in the UK (though it is in the US, where such loans are called "no recourse").

I could be mistaken though it was the Lifetime Mortgage, though my incorrect info as since reading again seems Capital+Interest are paid end of Mortgage or whatever eligible circumstances.  
Though not every Natwide 'later in life' products include No Negative equity Guarantee.

Linton

Deleted_User said:

Its a very expensive way to borrow.

Far more efficient to sell the house and rent or to buy a cheaper property. 

I choose my housing on the basis of where I would like to live, not whether it is an efficient use of money or not.  Don't you? What does efficiency matter when you are dead?  If you have no strong wish/need to leave your wealth to your family as an inheritance, the most efficient strategy is surely the one that gives you the greatest access to your capital whilst you are alive. 

dunstonh

westv said:

Deleted_User said:

Its a very expensive way to borrow.

Far more efficient to sell the house and rent or to buy a cheaper property. 

Is it? Even when you end  up paying quite a few hundred pounds a month in rent?

You can get equity release deals around 1.5%-2% at the moment.  So, I guess it depends on whether you think that is expensive or not.

[Deleted User]

Linton said:

Deleted_User said:

Its a very expensive way to borrow.

Far more efficient to sell the house and rent or to buy a cheaper property. 

I choose my housing on the basis of where I would like to live, not whether it is an efficient use of money or not.  Don't you? What does efficiency matter when you are dead?  If you have no strong wish/need to leave your wealth to your family as an inheritance, the most efficient strategy is surely the one that gives you the greatest access to your capital whilst you are alive. 

I do but had my cash flow been so bad that I needed an equity release loan, I would have sold the house.  When you borrow at 4.5% interest guaranteed for life and then make 0.5% interest which could drop... Its a bad deal.  Does not really dhelp the cash flow   vs other options and makes it more likely you’ll run out of money. 

Guess its ok if your life expectancy is short and no kids. 

Nebulous2

Linton said:

Deleted_User said:

Its a very expensive way to borrow.

Far more efficient to sell the house and rent or to buy a cheaper property. 

I choose my housing on the basis of where I would like to live, not whether it is an efficient use of money or not.  Don't you? What does efficiency matter when you are dead?  If you have no strong wish/need to leave your wealth to your family as an inheritance, the most efficient strategy is surely the one that gives you the greatest access to your capital whilst you are alive. 

Lifestyle choices and options are individual, sometimes location isn’t the biggest consideration. 

We moved to a small city in our 20s to a new-build semi. I never imagined going back. 

30 years on, thinking about downsizing, and there is very little difference in price between our house and a modern 2 bed flat here. We could sell, move, lose a lot of amenity and free up very little cash.

Back where we came from houses are much cheaper, so we bought one and have used it at weekends (lockdown permitting) It’s amazing how comfortable it has felt. 

We’re now selling our main house as part of the path to retirement and moving back full-time. We have gone from, we are never going back, to it would be closer to family but I wouldn’t like it, to this is ok, to this is what I want. 

Mutton_Geoff

Linton said:

Deleted_User said:

Its a very expensive way to borrow.

Far more efficient to sell the house and rent or to buy a cheaper property. 

I choose my housing on the basis of where I would like to live, not whether it is an efficient use of money or not.  Don't you? What does efficiency matter when you are dead?  If you have no strong wish/need to leave your wealth to your family as an inheritance, the most efficient strategy is surely the one that gives you the greatest access to your capital whilst you are alive. 

Traditional equity release with compounding interest and no payments is very different from the newer retirement interest only mortgages where capital owed remains constant through monthly interest cover.

With low interest rates, the RIO mortgages are something I am looking at to access my own capital in retirement rather than leave a large legacy to persons unknown.

OLD_OZZY

My husband & I took out an Aviva Equity Release 20 years ago. Now wish to downsize from a freehold property to a cheaper leasehold flat & have accepted that we have to repay the ERC the difference.
Flat has 107 years left with a current £150 pa ground rent. Lease began in 2001, reviews every 21 years so first/next review is due 2022. Lease is subject to a statutory rent cap, the percentage increase being equal to the percentage increase of property value over the relevant period. In fact we are paying less for the flat than it was sold for 20 years ago. Lease also has a clause 'it ( the ground rent increase) would not be a premium that would effectively cause a problem'.
But the ERC solicitors, a huge global international company, refuse to accept this and are insisting on a Deed of Variation to cap the ground rent to £250pa for the next 60 years. I totally understand that this rule is to allow freeholders to reclaim the property should there be a payment default. But the freeholders are unwilling to change the current lease agreement as it would then also have to apply it to the other 15 flat owners in the building.  My husband is 82, I am 75, so we are not likely to live for another 60 years during which time the flat will have been sold on and the ERC will have regained their equity tranche anyway.
We have come to an intransigent & inflexible deadlock with the flat vendors and house purchasers threatening to pull out due to the 4 month delay in conveyancing, not to mention two very stressed out pensioners! The big global solicitors have taken days & sometimes weeks to answer our solicitor's emails/phone messages & sometimes request information that she has already given them. In other words the law company is too big to be efficient.!
After many emails & telephone calls to MANY different customer advisors, case handlers, technical directors, associates, & to CEO's themselves !! it is still stalemate.
The trouble with common sense is that it is not very common!
Any helpful suggestions would be much appreciated.

dunstonh

OLD_OZZY said:

My husband & I took out an Aviva Equity Release 20 years ago. Now wish to downsize from a freehold property to a cheaper leasehold flat & have accepted that we have to repay the ERC the difference.
Flat has 107 years left with a current £150 pa ground rent. Lease began in 2001, reviews every 21 years so first/next review is due 2022. Lease is subject to a statutory rent cap, the percentage increase being equal to the percentage increase of property value over the relevant period. In fact we are paying less for the flat than it was sold for 20 years ago. Lease also has a clause 'it ( the ground rent increase) would not be a premium that would effectively cause a problem'.
But the ERC solicitors, a huge global international company, refuse to accept this and are insisting on a Deed of Variation to cap the ground rent to £250pa for the next 60 years. I totally understand that this rule is to allow freeholders to reclaim the property should there be a payment default. But the freeholders are unwilling to change the current lease agreement as it would then also have to apply it to the other 15 flat owners in the building.  My husband is 82, I am 75, so we are not likely to live for another 60 years during which time the flat will have been sold on and the ERC will have regained their equity tranche anyway.
We have come to an intransigent & inflexible deadlock with the flat vendors and house purchasers threatening to pull out due to the 4 month delay in conveyancing, not to mention two very stressed out pensioners! The big global solicitors have taken days & sometimes weeks to answer our solicitor's emails/phone messages & sometimes request information that she has already given them. In other words the law company is too big to be efficient.!
After many emails & telephone calls to MANY different customer advisors, case handlers, technical directors, associates, & to CEO's themselves !! it is still stalemate.
The trouble with common sense is that it is not very common!
Any helpful suggestions would be much appreciated.

I recommend you post on your own thread as your issue is not relevant to this thread and having multiple conversations on unrelated issues going on at once gets messy.  You also risk-taking this thread off-topic which is considered unfair on the original poster.

The mortgage section of this board is probably the best place to repost this.