Equity Release Alternatives?

lisyloo

Altior said:

Renting is being 'dismissed' as an option a little too quickly I feel. I hope to be in a similar position to the OP, and more than likely I will sell up and rent, rather than ER. It obviously depends upon the situation and the circumstances at the time. I'll be looking at assisted living type places if I do opt for renting. The main benefit being that you no longer have to deal with repairs and maintenance, possible access to maintained communal gardens, other types of assistance etc. Also, living alone, a warden assisted place could be of significant benefit. From my research, these are not as expensive as regular market rental properties. Though obviously there are very high end ones, and the market could be a lot different when the time arises.

The issue is none of us know how long we’ve got (we’ll most of us) and the obvious problem with renting is that you could live a long time.

lisyloo

Downsizing doesn’t have to focus on smaller (although that’s often suitable for couples or singles who have a family home).
it can be a cheaper area.
that doesn’t necessarily mean cheap and nasty.
there are areas that are decent but not attractive to people of working age, so that’s one option.
of course it depends on your starting point. If you’re in the south east then it’s easier to go cheaper.

yes there are ties but the OP claims to have no beneficiaries then I was assuming those ties weren’t there.

Julezy101

Wow I didn't expect this much debate!

Just to put some more context into my situation - I'm not in position yet to make a decision on this and am hopefully many years off it, I just wanted to get a range of other options as it was a topic that I've had an interest in and what other people would do. 

As I've got older I now like to consider things based on whether they represent 'value' or not with an aim to maximise value.
Based on this (to me) ER doesn't seem good value - just my opinion.

I dont have an expensive lifestyle and should have enough to have a comfortable retirement (SIPP, ISA, 2 small work pensions and the SP) but I would like to get the most 'value' out of a large asset that I've spent many years paying for i.e my house. This would make retirement even more comfortable.

I think straight out private renting is a no no but the assisted living is quite appealing which I'd not thought of. Downsizing is a possibility but again unless you are leaving the property to someone / charity is that really the best value. Also the possibility of a lower standard of living than what your used to. I think I can see myself living outside the UK in my later years - somewhere warmer - UK winters are too miserable and if you dont have to endure them why would you. 

So far here's the options

1. Sell house - rent / assisted living with the capital from house sale until it runs out / die (with all caveats)
2. ER 
3. Stay in house - gift to charities / friends
4. Downsizing - release some capital, leave house to charities / friends.

Altior

lisyloo said:

Altior said:

Renting is being 'dismissed' as an option a little too quickly I feel. I hope to be in a similar position to the OP, and more than likely I will sell up and rent, rather than ER. It obviously depends upon the situation and the circumstances at the time. I'll be looking at assisted living type places if I do opt for renting. The main benefit being that you no longer have to deal with repairs and maintenance, possible access to maintained communal gardens, other types of assistance etc. Also, living alone, a warden assisted place could be of significant benefit. From my research, these are not as expensive as regular market rental properties. Though obviously there are very high end ones, and the market could be a lot different when the time arises.

The issue is none of us know how long we’ve got (we’ll most of us) and the obvious problem with renting is that you could live a long time.

This is very true, but I've also seen how much my parents have needed to lean on me and others, to manage their affairs, organise quotes, boiler servicing, garden maintenance, exterior cleaning and all the other things that we take for granted when we are younger and running a household. I feel like it's a different equation if you live alone, and don't have others you can lean on, either through availability or choice. 

As well as unlikely knowing how long we have left, we also don't know when we'll cross the line and can't cope with everything on our own. The key point of my intervention on the thread is that I don't feel the benefits of renting should be underestimated. However, I'd want to have plenty of financial headroom if/when going down that route. 

Linton

Julezy101 said:

Wow I didn't expect this much debate!

Just to put some more context into my situation - I'm not in position yet to make a decision on this and am hopefully many years off it, I just wanted to get a range of other options as it was a topic that I've had an interest in and what other people would do. 

As I've got older I now like to consider things based on whether they represent 'value' or not with an aim to maximise value.
Based on this (to me) ER doesn't seem good value - just my opinion.

I dont have an expensive lifestyle and should have enough to have a comfortable retirement (SIPP, ISA, 2 small work pensions and the SP) but I would like to get the most 'value' out of a large asset that I've spent many years paying for i.e my house. This would make retirement even more comfortable.

I think straight out private renting is a no no but the assisted living is quite appealing which I'd not thought of. Downsizing is a possibility but again unless you are leaving the property to someone / charity is that really the best value. Also the possibility of a lower standard of living than what your used to. I think I can see myself living outside the UK in my later years - somewhere warmer - UK winters are too miserable and if you dont have to endure them why would you. 

So far here's the options

1. Sell house - rent / assisted living with the capital from house sale until it runs out / die (with all caveats)
2. ER 
3. Stay in house - gift to charities / friends
4. Downsizing - release some capital, leave house to charities / friends.

I feel  it would help if you thought through what you mean by "Most Value".  It seems to me that this can only be ascertained in the context of what you want to do. Perhaps "Most Value" could be just continuing to live in your current home with enough money to finance the standard of living you are used to possibly with changes made to the house to make it more comforable. On the other hand it could be releasing as much money as possible whilst you are alive to pay for travel, a more comforable life style or whatever.

If you can explain and cost what you want to achieve we could suggest the most efficient way to get the required money from your house. Needing £300K is very different to needing £20K. If there is no benefit you really want that you cannot already afford I cant see any point in worrying about getting Most Value.

lisyloo

I would agree with you that equity release is not good value at a youngish age (it improves as the risk lowers).
you are paying a commercial premium (including of course profit) for having the money and the house, so there is a cost and that’s going to be large over decades.

downsizing is good value because the costs are relatively low.
a smaller property or different area doesn’t have to mean a worse lifestyle but yes you do sacrifice space.
there are benefits - lower bills, less cleaning, less maintenance and of course less capital tied up.
owning is generally good value compared with renting (as of course landlords don’t do it for free) but of course it requires capital tied up.

have you considered a hybrid approach.
e.g. Move to 2 bed property from family home aged 70.
move to 1 bed property or flat aged 80
equity release at 85 (just an example) when it’s MUCH better value

what you cannot do is have the money and the large house for free
the cost of equity release is the price of having the large house and access to the money

our experience is that our parents had a better lifestyle when they downsized.
they moved to sheltered accommodation and had company and facilities and less maintenance and cleaning which was an improvement to their lifestyle when they were elderly and disabled.

Albermarle

downsizing is good value because the costs are relatively low.
a smaller property or different area doesn’t have to mean a worse lifestyle but yes you do sacrifice space.

Although there is always the possibility when downsizing to a smaller property and/or in a cheaper area, that you or any partner maybe turn their nose up at the smallness and/or the area, when you/they actually start looking

It seems what can happen is that the usual human aspirations means you may actually start to move on to looking at nicer properties, in a nicer area, with a sea view maybe. Then suddenly, the cash being potentially generated from the 'downsize' shrinks considerably.

Although there could still be some advantages, like lower bills and less maintenance/gardening maybe . Or somewhere less hilly or a house with no steep steps/bungalow/nearer shops etc

Julezy101

Linton said:

Julezy101 said:

Wow I didn't expect this much debate!

Just to put some more context into my situation - I'm not in position yet to make a decision on this and am hopefully many years off it, I just wanted to get a range of other options as it was a topic that I've had an interest in and what other people would do. 

As I've got older I now like to consider things based on whether they represent 'value' or not with an aim to maximise value.
Based on this (to me) ER doesn't seem good value - just my opinion.

I dont have an expensive lifestyle and should have enough to have a comfortable retirement (SIPP, ISA, 2 small work pensions and the SP) but I would like to get the most 'value' out of a large asset that I've spent many years paying for i.e my house. This would make retirement even more comfortable.

I think straight out private renting is a no no but the assisted living is quite appealing which I'd not thought of. Downsizing is a possibility but again unless you are leaving the property to someone / charity is that really the best value. Also the possibility of a lower standard of living than what your used to. I think I can see myself living outside the UK in my later years - somewhere warmer - UK winters are too miserable and if you dont have to endure them why would you. 

So far here's the options

1. Sell house - rent / assisted living with the capital from house sale until it runs out / die (with all caveats)
2. ER 
3. Stay in house - gift to charities / friends
4. Downsizing - release some capital, leave house to charities / friends.

I feel  it would help if you thought through what you mean by "Most Value".  It seems to me that this can only be ascertained in the context of what you want to do. Perhaps "Most Value" could be just continuing to live in your current home with enough money to finance the standard of living you are used to possibly with changes made to the house to make it more comforable. On the other hand it could be releasing as much money as possible whilst you are alive to pay for travel, a more comforable life style or whatever.

If you can explain and cost what you want to achieve we could suggest the most efficient way to get the required money from your house. Needing £300K is very different to needing £20K. If there is no benefit you really want that you cannot already afford I cant see any point in worrying about getting Most Value.

It is very thought provoking and I assume my thoughts will change as I get older (currently 54 nearly) - 'value' is difficult to quantify, what is value for someone may not be for someone else. At my age I want to maximise the value of my house in my lifetime - in 20 years I might not care at all and will be happy to live in a similar value property (all be it somewhere warmer) and lose the value of it. Interesting debate.

Linton

Julezy101 said:

Linton said:

Julezy101 said:

Wow I didn't expect this much debate!

Just to put some more context into my situation - I'm not in position yet to make a decision on this and am hopefully many years off it, I just wanted to get a range of other options as it was a topic that I've had an interest in and what other people would do. 

As I've got older I now like to consider things based on whether they represent 'value' or not with an aim to maximise value.
Based on this (to me) ER doesn't seem good value - just my opinion.

I dont have an expensive lifestyle and should have enough to have a comfortable retirement (SIPP, ISA, 2 small work pensions and the SP) but I would like to get the most 'value' out of a large asset that I've spent many years paying for i.e my house. This would make retirement even more comfortable.

I think straight out private renting is a no no but the assisted living is quite appealing which I'd not thought of. Downsizing is a possibility but again unless you are leaving the property to someone / charity is that really the best value. Also the possibility of a lower standard of living than what your used to. I think I can see myself living outside the UK in my later years - somewhere warmer - UK winters are too miserable and if you dont have to endure them why would you. 

So far here's the options

1. Sell house - rent / assisted living with the capital from house sale until it runs out / die (with all caveats)
2. ER 
3. Stay in house - gift to charities / friends
4. Downsizing - release some capital, leave house to charities / friends.

I feel  it would help if you thought through what you mean by "Most Value".  It seems to me that this can only be ascertained in the context of what you want to do. Perhaps "Most Value" could be just continuing to live in your current home with enough money to finance the standard of living you are used to possibly with changes made to the house to make it more comforable. On the other hand it could be releasing as much money as possible whilst you are alive to pay for travel, a more comforable life style or whatever.

If you can explain and cost what you want to achieve we could suggest the most efficient way to get the required money from your house. Needing £300K is very different to needing £20K. If there is no benefit you really want that you cannot already afford I cant see any point in worrying about getting Most Value.

It is very thought provoking and I assume my thoughts will change as I get older (currently 54 nearly) - 'value' is difficult to quantify, what is value for someone may not be for someone else. At my age I want to maximise the value of my house in my lifetime - in 20 years I might not care at all and will be happy to live in a similar value property (all be it somewhere warmer) and lose the value of it. Interesting debate.

The best and least stressful way to maximise the value of your house if you are not concerned about spending the money could well be to simply keep it and rely on long term inflation in house prices especially if it is a desirable house in a desirable location..

thriftytracey

The problem is that suitable downsizing properties are just not being built.  On a recent development locally of 100 houses just two bungalows were built.  Bungalows generally are snapped up and we have discovered that they go for the same price as our large house and garden.  There would hardly be any equity released, probably just enough to pay stamp duty and solicitor, estate agent and moving costs.  Some two bedroomed bungalows we have looked at are going for more than our property would fetch.  Not only that many of them need substantial work.  It is very depressing.  

A friend has been trying to sell her father's assisted living flat for 12 months as he is in a residential care home.  It was marketed at £25k less that the original purchase price in order to sell.  She finally found a buyer, conveyancing has taken 4 months so far and now her father has died so it now has to go through probate.  Her buyer has withdrawn as he has lost his buyer and now has health issues.  During this whole period she has had to continue to pay £600 a month service charge.  All the estate agents she contacted said assisted living apartments just do not sell.  She has to give a proportion of the "sale price or market value" whichever is the highest to the assisted living facility.  She has contacted one of these companies who buy properties (they bought her father's bungalow so he could quickly move to the assisted living facility) and they said "I know it is insulting but we can only offer £30 - £40k for it because they are hard to sell and having to continue to pay the service charge".  She is now thinking of auction and they are suggesting a low reserve price.

Also, some of these assisted living facilities, particular those run by housing associations are very badly insulated.  There are many complaints from tenants of a well known HA near me of damp and condensation.