Equity Release Alternatives?

Julezy101

Apologies if this is the wrong board to post this on.

Given a situation where you own your house outright and have no dependants to leave it to on death what are the alternatives to Equity Release?

Lets say house is worth 300k - I know Equity Release you end up 'losing' a lot - say at age 70 you could get 150k or less?
Without Equity Release on death the Government get the house you've paid for - so 300k to them, thanks very much.

How about selling up at say age 70 (if you get there) and renting until either you need a care home or die beforehand. 
Say £1200 a month rent - £14.4K p.a would last you 20 years. At least this way you are spending your equity rather than gifting it to the Government.
Obviously you would need a good landlord who would do extended tenancy or be prepared to move (not ideal at a senior age). Are there any alternatives?
 

lisyloo

yes there's an obvious alternative of downsizing to a smaller property or one in a cheaper area.
There are obviously compromises to be made but some of those compromises can suit elderly people
e.g. less cleaning in a smaller property
lower bills in a smaller property
smaller garden and house to maintain

You don't "lose" a lot on equity release, but you have to pay for privilege of having the money AND the house at a commercial rate.

The renting is full of pitfalls. You might be lucky and be well and live a long time and run out of money.
You could run out of money and end up in a horrible local authority care home.

Why do you need to gift your money to the government. Do you not have any friends at all? Can you not think of any charities that could do fantastic work with your money?

easy

Bear in mind that £1200 per month rent now,  will be higher in 10 years time,  so your money wouldn't last you 20 years  (unless you made some VERY savvy investments that outpace inflation.. 

Linton

Julezy101 said:

Apologies if this is the wrong board to post this on.

Given a situation where you own your house outright and have no dependants to leave it to on death what are the alternatives to Equity Release?

Lets say house is worth 300k - I know Equity Release you end up 'losing' a lot - say at age 70 you could get 150k or less?
Without Equity Release on death the Government get the house you've paid for - so 300k to them, thanks very much.

How about selling up at say age 70 (if you get there) and renting until either you need a care home or die beforehand. 
Say £1200 a month rent - £14.4K p.a would last you 20 years. At least this way you are spending your equity rather than gifting it to the Government.
Obviously you would need a good landlord who would do extended tenancy or be prepared to move (not ideal at a senior age). Are there any alternatives?
 

Why do you want an alternative to Equity Release?  With ER what does it matter what you lose when you die if you have no deserving beneficiaries?  You cant take it with you.  In the meantime you have 50% of the value of the house to use as you wish.

Selling the house and spending the lot on renting a home you dont own and from which you could be evicted in your extreme old age seems far worse.  You manage to both have less free cash and lose the security of owning your home compared with using ER.

One thing isnt right in your posting - the Government dont get the house when you die unless you dont make make a will and no blood  relative can be found.

Qyburn

Julezy101 said:

How about selling up at say age 70 (if you get there) and renting until either you need a care home or die beforehand. 
Say £1200 a month rent - £14.4K p.a would last you 20 years. At least this way you are spending your equity rather than gifting it to the Government.
 

I don't see how that benefits you. You're spending your equity, but spending it on something you would have had already, your home. 

squirrelpie

Julezy101 said:

Without Equity Release on death the Government get the house you've paid for - so 300k to them, thanks very much.

As Linton already pointed out, this is wrong. The house becomes part of your estate. If you write a will then the estate is divided up as the will states. You don't have to leave money to dependents - you can for example leave it to charity, or to a close friend, or some mixture etc. Leave it all to the RNLI or Ukrainian animals or whatever you choose.

Even if you don't write a will, it's not just dependents who can inherit. Other relatives can also - see https://www.citizensadvice.org.uk/family/death-and-wills/who-can-inherit-if-there-is-no-will-the-rules-of-intestacy/

The government only get it if there is both no will and no relatives.

Albermarle

Selling the house and spending the lot on renting a home you dont own and from which you could be evicted in your extreme old age seems far worse.  You manage to both have less free cash and lose the security of owning your home compared with using ER

+ 1 for this . Renting as you get older is to be avoided if possible.

Julezy101

Thanks for the replies - I guess the renting idea is probably a silly one.

Surely I'm not the only one who thinks ER feels like your being taken advantage of to some extent? 

Linton

Julezy101 said:

Thanks for the replies - I guess the renting idea is probably a silly one.

Surely I'm not the only one who thinks ER feels like your being taken advantage of to some extent? 

No, not being taken advantage of.   An ER company lends you a large sum at not vary far above normal rates and they have only a rough idea as to when they will get their money back.  It's a straight commercial deal based on market interest rates and actuarial calculations of  life expectancy. 

You do have the option of rolling up the interest in the loan or paying it yourself to substantially reduce the costs, but in your circumstances the end result if you pay the interest is that you pay more money before you die so your beneficiaries can inherit more afterwards which I guess is not what you want. 

ER may have been a minefield of dodgy salesmen 20 or 30 years ago but it is now well regulated and some of the large well known companies like LV and L&G have entered the market.  It is a requirement of ER that you are advised by a regulated professional advisor.

Andy_L

squirrelpie said:

Julezy101 said:

Without Equity Release on death the Government get the house you've paid for - so 300k to them, thanks very much.

As Linton already pointed out, this is wrong. The house becomes part of your estate. If you write a will then the estate is divided up as the will states. You don't have to leave money to dependents - you can for example leave it to charity, or to a close friend, or some mixture etc. Leave it all to the RNLI or Ukrainian animals or whatever you choose.

Even if you don't write a will, it's not just dependents who can inherit. Other relatives can also - see https://www.citizensadvice.org.uk/family/death-and-wills/who-can-inherit-if-there-is-no-will-the-rules-of-intestacy/

The government only get it if there is both no will and no relatives.

Trivia time, if you die intestate in Cornwall it goes to the Duchy of Cornwall (the royal estate) rather than the taxman

dunstonh

Julezy101 said:

Thanks for the replies - I guess the renting idea is probably a silly one.

Surely I'm not the only one who thinks ER feels like your being taken advantage of to some extent? 

Nope.    It is the commercial reality of the situation.  You are asking a lender/insurer to lend you money for an undetermined period that could be 40 years.    They are not going to realise that profit until the debt is repaid.  

There are risks.   For example, one of the old equity releases that often gets moaned about by beneficiaries is called out sorts of names for being unfair.   However, at the time it was available, the media called it risky to the lenders and good for consumers.    House prices were going down but it protected people in that scenario from going into negative equity.   No-one predicted the house price boom and it turned out, with hindsight to be poor value for consumers.   However, it did exactly what it said it would do.     When you are looking at 30-40 year timescales, there is always going to be a risk of rare events occurring that change things for the better or worse without that being planned.