Equity Release

mottyt

Hi,

Does anyone have any recent experience of equity release as a means of accessing money?

Asking as my mother in law has been talking to a broker about it and I've only read horror stories...

Thanks in advance.

sevenhills

mottyt said:

Asking as my mother in law has been talking to a broker
about it and I've only read horror stories...

Thanks in advance.

I get letters from Age Partnership on a regular basis, what do you mean by "talking to a broker"?

Keep_pedalling

The horror stories mainly come from those missing out on on their inheritance, rather than those taking out the loan.

xylophone

Asking as my mother in law has been talking to a broker 

https://www.equityreleasecouncil.com/find-a-member/advisers/

might be worth a look.

[Deleted User]

On the surface this is a very appealing option to those that would like to stay put and do not have enough cash flow to comfortably cover their expenses. However, relying on a reverse mortgage for cash flow over many years is a risky plan as the total debt continually increases while home equity decreases.  Not a good combination. It’s a short term fix, with compounding long-term problems.  

Particiularly if your mother in law still has some way to go, she is at risk  of spending all the new funds.  If she downsizes or rents and invests the equity, the long term picture would have been very different. 

QrizB

There's a long-running thread on equity release in the "Over 50s" section that might be helpful:
https://forums.moneysavingexpert.com/discussion/5860953/equity-release-guide-discussion

dunstonh

Does anyone have any recent experience of equity release as a means of accessing money?

yes

Asking as my mother in law has been talking to a broker about it and I've only read horror stories...

1980s equity release products have a poor reputation.  However, they were considered good value in the day.  Just that no-one predicted the property price boom that occurred after that.  Modern products have caps on them and are as cheap as mortgages.

most complaints about equity release come from relatives who find out they are not inheriting as much as they thought they were going to.

Linton

I took out an ER mortgage earlier this year.....

Equity release in the form of a lifetime mortgage with roll-up is highly regulated and large well known solid companies (eg L&G, LV) are major players in the market.  Interest rates are reasonable , I pay 3% fixed for the lifetime of the mortgage so there is no risk from increases in interest rates.  It is flexible in that you can choose to pay off the interest and some of the capital without extra charges and it can be transferred if you move house as long as the new house meets the lending criteria.  There is also a no negative equity guarantee. The cowboy days and cases of people losing their home through ER are long gone.

Like all debt it could be dangerous if you need it to pay for your day to day living, but in extreme cases could be the only option.  However if that is not the case ER under current conditions seems to me to be a very useful tool in managing ones' finances in retirement should there be no need/wish to retain the house for inheritance purposes.

Silvertabby

We don't have children to leave our house to, and our pensions are more than enough to live comfortably.  However, we haven't ruled out some form of equity release in the future to pay for a cleaner and gardener, etc.

mottyt

Thanks for the input.

Yes she has two daughters who inherit the house that the money is borrowed against.

She wouldn't be borrowing the whole value of the house though, of course.

Are these assumptions correct:

House worth 300k and no mortgage currently.

She takes £30,000 @ 2% (not actual quoted rated). Over 20 years the interest compounds and therefore after the term she owes c.£44,500.

Assume house still worth 300k in 20 years, she sells house and pays back the £44,500 and is left with £255,500?

Essentially, it's an expensive way to borrow money right,  or is there more to it than my scenario above?

Thanks again in advance.

mottyt

Appreciate there is advice etc out there but racing against time to provide any additional detail before she rushes into something, which have obviously advised against.