Equity Release...one scenario it might work.

mamabuddah

it would appear that a separation is looming on the cards, so I’m wondering is this one scenario where Equity Release might work...

Home worth approx £150k, owned outright, no mortgage,  joint owners age, late 60’s, splitting up amicably, marriage has run its course.

is it feasible to release maximum equity (how much might be available? ), give it to spouse and along with their savings enable them to purchase a new property. Meantime other spouse remains in the home and pays whatever rent/mortgage (or whatever they call it) and they get their day there and when they pass, the house goes to the Equity Release company.

At the moment I don’t really want to contact companies to avoid constant calls and emails about whether “I’m going to proceed” or “have I thought about it yet”, hence posting here for thoughts/advice etc.

To me it sounds like this is one scenario Equity Release might work (I know most people say it’s not a great idea and might only work to the advantage of a few) but on face value...it might work...and to be honest I can’t think of any other way to split. Selling the home and halving the proceeds won’t generate enough to purchase two separate properties, but as far as I can see, this will enable one to buy and the other continue to rent...which financially shouldn’t be a problem. It would be nice to remain in the existing home rather than try to find a rental property at this stage of life.

silvercar

In the future the person staying in the current home may struggle to move if that means clearing the equity release charge.

The person buying and moving out always has that money. Doesn’t sound very equal to me.

mamabuddah

silvercar said:

In the future the person staying in the current home may struggle to move if that means clearing the equity release charge.

The person buying and moving out always has that money. Doesn’t sound very equal to me.

The person staying is happy to give up the equity and any joint savings, it is 100% amicable and they are happy to spend rest of their days in the house and pay rent, the other person will be moving away from the area completely. 

Brie

I would imagine that no matter how amicable or how fair a settlement is after a split there's a high chance of resentment about the deal at some point for either party.

Personally I think that ER is a good thing to consider in this situation as otherwise the solution would be to sell the home and both start from scratch.  There may be very good reasons for one to stay there (lived there longer, it means more to them, whatever).  And if in their late 60s it's unlikely that anyone will give either a mortgage so if they did sell up then the alternatives are either rental or significant downsizing.  

Of course the T&Cs of the ER need to be considered and I don't know how anyone can do that without contacting a company in some form.  Maybe set up an email address strictly for this so the account can be deleted if necessary. 

And then once the information is available then it's time to talk to a lawyer to help sort out what might be considered fair based on other considerations such as pensions/income etc.

silvercar

mamabuddah said:

silvercar said:

In the future the person staying in the current home may struggle to move if that means clearing the equity release charge.

The person buying and moving out always has that money. Doesn’t sound very equal to me.

The person staying is happy to give up the equity and any joint savings, it is 100% amicable and they are happy to spend rest of their days in the house and pay rent, the other person will be moving away from the area completely. 

I don’t understand your comment about paying rent. In my limited knowledge the whole point of equity release is that you don’t pay rent/ mortgage, but instead the interest on the equity released is bundled up and repaid when the property is sold.

apparently you can make repayments and this will increase what you can borrow.

silvercar

Here is an online calculator that doesn’t require any contact info:

https://www.moneyrelease.co.uk/Thank-You/Equity-Release-Max-Calculator/?propv=150,000&agey=68&mortv=0&sj=Single&propt=House&ctry=England#results

Linton

To answer some points, based on my experience...

Someone taking ER has to work through a suitably qualified advisor, either your own or one offered by the lender.  Different lenders will have different offers so an advisor really is necessary to help you choose the most appropriate option.  It is a specialist business so it is quite possible that you will never previously have heard of the company you eventually choose. It is not a matter of visiting the standard High Street mortgage lenders.

There are 2 main forms of ER, a RIO (retirement interest only mortgage) or one in which the interest is rolled up into the loan. A RIO is likely to provide a higher % of the value of the house but is dependent on an affordability test for the interest.  A full ER is purely dependent on the saleability of the property.  Very broadly I guess for somone in their late 60's  a RIO could be up to 50% of equity and roll-up ER say 30% though that was when interest rates were much lower.

Interest rates are likely to be fixed for one's lifetime, so no worries about future rises.

An ER mortgage should be portable in that you can move it to a new house without early repayment charges.  However the new house must meet the lender's value and saleability requirements.