Equity release

Titus_Wadd

Thinking about the OP's family, would they want to inherit a rental property and run it as a business?  If the property is still tenanted they'll have the rigmarole of seeking vacant possession to sell it.  With just the OP's home, their inheritance is more "accessible".  OP check with you kids; they may not want to have to become landlords.  If the two options result in the kids inheriting one property to split between them, the option without a tenant is the most straightforward and probably less costly option.

I'm struggling to see a good reason to do the OP's Equity Release buy-to-let plan; perhaps the OP could elaborate.  Mr Wadd and I are a similar age with a couple of heirs, currently in their late 20s/early 30s, but I wouldn't be tempted by this plan; perhaps if we knew what you're trying to achieve?  The house you're living in is an asset already, without future fees and interest payments etc if the mortgage is already paid off.

dwsjarcmcd

I agree with everyone else, it’s a terrible idea! The stamp duty alone is £11,500 on a £300k BTL, then there are legal fees on top.

You will do well to get a gross yield of 6% on this house, so paying an Equity Release rate of 6% is just nuts.  That’s before you factor in tax on the rent, voids, management fees etc.

You really don’t need financial advice, a few hours of research into the tax implications and the regulations you need to adhere to should be enough (that’s before the nightmare tenant stories you will come across).

MarkStbarbe

Thanks for all your advices,
 Was hoping to get an income from BTL property, but after all your advices seems a bad idea, will probably now downsize and invest the money in a fixed interest rate account 

GDB2222

MarkStbarbe said:

Thanks for all your advices,
 Was hoping to get an income from BTL property, but after all your advices seems a bad idea, will probably now downsize and invest the money in a fixed interest rate account 

If you invest the money like that, you lose out to inflation. I think you should see an IFA.

dwsjarcmcd

GDB2222 said:

MarkStbarbe said:

Thanks for all your advices,
 Was hoping to get an income from BTL property, but after all your advices seems a bad idea, will probably now downsize and invest the money in a fixed interest rate account 

If you invest the money like that, you lose out to inflation. I think you should see an IFA.

Whilst that's true, it is still better than the OP's initial thought! 

Mutton_Geoff

MarkStbarbe said:

Thanks for all your advices,
 Was hoping to get an income from BTL property, but after all your advices seems a bad idea, will probably now downsize and invest the money in a fixed interest rate account 

Even that isn't necessarily the best thing to do. How about a money market fund in a tax wrapper like a SIPP (money back from HMRC) or ISA (tax free gains) and current SONIA funds c 4%

RNM_92

My advice would be don’t touch equity release with a bargepole. My grandad did this about 18 years ago to buy a holiday apartment abroad. He had about £200,000 in savings so could have bought the apartment outright, but decided to go down the equity release line instead. Result he’s now lost well over £300,000 (including every penny of his savings). The only reason he isn’t losing any more money is because my mum eventually found out a few years ago and managed to get a complicated kind of interest only mortgage to stop it accumulating any more interest (shes paying it herself and got my grandparents to put their house in her name, which is how shes been able to do it). If she hadn’t they’d have lost nearly all their money/equity by now. A lifetime of hard work and savings down the toilet. Don’t go down that route unless you want to end up with nothing outside of the property you would be buying.

Any good financial advisor would say the same. My fiancé’s dad was a financial advisor and he actively went round telling people not to do it.