Equity release, rented house.

Hazel1980

Eighty year old dad in good health currently abroad, usually returns to England for a few months at a time and stays with friends or rents a room while in the UK but currently can't travel. Has a mortgage free house which he rents out in UK, that's his main income. Wants to release £20k equity now, house valued at £240k. Due to Covid unable to return to sort out in person, quarantine time/hotel costs and high infection rates in this country means safer where he is. Best way to do this all online? Looking at interest rates, fees etc so want best deal. Any advice appreciated. House will likely be sold in the coming years as increased costs of repairs etc is making the profit from rent not not worth it and tbh at his age the money he sells it for will see him out comfortably. What's his best options?

DrEskimo

What is the £20k needed for now?

Best option is to sell it, particularly if he is planning on selling it in the near future anyway.

Hazel1980

DrEskimo said:

What is the £20k needed for now?

Best option is to sell it, particularly if he is planning on selling it in the near future anyway.

To put it bluntly he's been a bit of silly old man and I do despair but what's done is done, expensive girlfriend, some bad investments and his car now needs replacing. House rental income took a nosedive due to big repairs one after the other so he's £3000 less on rent income this financial year. 
He needs the money quick, the tenant has another 10 months left in contract so not able to sell it yet. Also he's hoping things will pick up, no big repairs so income goes up as last year was a big hit to rental income as was making good money. He's contacted a few equity release companies but I'm trying to ensure he doesn't lose too much money. The £20k would cover everything and put some money in the bank.

GrumpyDil

I doubt he could do equity release as he's not living there. As it's let he might be able to borrow some money on a BTL mortgage but 20000 may be below minimum loan value and not sure about loans given his age. I think you'd get better advice by asking a board guide to move this thread to the mortgages board

[Deleted User]

equity release- almost certain no   sell-best idea

Thrugelmir

Sell the property with the tenants in situ. 

[Deleted User]

Equity release is a terrible idea
At just 5% interest, the debt will double in 15 years unless he is paying off the interest regularly, add on up to £3000 in fees, it's just so wrong it's laughable.
Borrow £20,000 at 60 at 5.1% on a £120,000 home and the debt is £40,000 at 74, £80,000 at 88

Hazel1980

Deleted_User said:

Equity release is a terrible idea
At just 5% interest, the debt will double in 15 years unless he is paying off the interest regularly, add on up to £3000 in fees, it's just so wrong it's laughable.
Borrow £20,000 at 60 at 5.1% on a £120,000 home and the debt is £40,000 at 74, £80,000 at 88

Thankyou everyone for the replies.
He's found out for himself after a telephone appointment with a company it is indeed a terrible idea! The fees were ridiculous, interest etc meant it is a very expensive loan!
I really struggled to find any clear cost information from companies which made me think they rely on people contacting them so they can do the sales pitch.
Don't know what he's going to do now but definitely not the equity release. 

TJS88

Hello, I was interested to read the comments on Equity Release. I am aged 75 in a position whereby I have a very small pension but a substantial house without mortgage. I cant get a regular mortgage because of my very small pension. My income comes from cashing in investments. I want to release equity to pay for improvements on our house and distributions to grandchildren, this has the added benefit of reducing IHT. Now that interest  rates are typically below 3% the compounding effect of the interest is a lot less. I am told there are better ways to satisfy my need, but I cant find them, I certainly don't want to go the Reversionary Mortgage route.
The big negatives for Equity Release are  the large Early Repayment Penalties charged in certain circumstances and the huge commissions paid to the compulsory IFA, which of course effect our early repayment penalties  and the interest rate. 
Any advice would be greatly appreciated. 

fwor

TJS88 said:

Hello, I was interested to read the comments on Equity Release. I am aged 75 in a position whereby I have a very small pension but a substantial house without mortgage. I cant get a regular mortgage because of my very small pension. My income comes from cashing in investments. I want to release equity to pay for improvements on our house and distributions to grandchildren, this has the added benefit of reducing IHT. Now that interest  rates are typically below 3% the compounding effect of the interest is a lot less. I am told there are better ways to satisfy my need, but I cant find them, I certainly don't want to go the Reversionary Mortgage route.
The big negatives for Equity Release are  the large Early Repayment Penalties charged in certain circumstances and the huge commissions paid to the compulsory IFA, which of course effect our early repayment penalties  and the interest rate. 
Any advice would be greatly appreciated. 

I suspect you will get a better response by starting a new thread with your own, specific questions.

Whether ER makes sense for improvements to your property is difficult to assess without any figures, but unless your investments are very limited in size, it would seem to make more sense to cash in investments to fund the improvements, unless that has too severe an effect on your income.

Using ER to give money to grandchildren doesn't seem to make any sense at all to me, as it will probably just rip out a significant amount of the money that they would eventually inherit anyway, all other things being equal.

From a simplistic point of view, ER really only makes sense for people with property but with nobody likely to inherit from their estate. For everyone else, the financial damage it will do to the value of the estate will overwhelm whatever you can do with the money while you are alive.

[Deleted User]

TJS88 said:

Hello, I was interested to read the comments on Equity Release. I am aged 75 in a position whereby I have a very small pension but a substantial house without mortgage. I cant get a regular mortgage because of my very small pension. My income comes from cashing in investments. I want to release equity to pay for improvements on our house and distributions to grandchildren, this has the added benefit of reducing IHT. Now that interest  rates are typically below 3% the compounding effect of the interest is a lot less. I am told there are better ways to satisfy my need, but I cant find them, I certainly don't want to go the Reversionary Mortgage route.
The big negatives for Equity Release are  the large Early Repayment Penalties charged in certain circumstances and the huge commissions paid to the compulsory IFA, which of course effect our early repayment penalties  and the interest rate. 
Any advice would be greatly appreciated. 

If you want to help grandkids, sell your house, downsize and go that way. Using ER will just stick a huge compounding loan on your house which, if you are lucky enough to live for 10-20 more years, could well eat up a substantial amount of the estate you can leave