I have some questions about equity release, please.

BillyTheBestCat

Hi everyone

I have read and read around equity release till I'm blue in the face and I'm confused, so any help would be most gratefully received, thanks in advance

We (my husband and I) have discussed equity release and are certain that it's the way to go for us. We have no dependants so our understanding is that it should (?) be reasonably straightforward.

We are in our early/mid seventies and own our house outright.

My main question is this - am I right in understanding that there are companies who will handle the entire process and only require payment once the equity has been released? Is that correct, please? I do understand that these companies will a) charge more and b) require that you take out a certain minimum sum. Again, am I right in this, please?

I am asking because the likelihood of our being able to raise the money for the fees ahead of time is minimal, to say the least.

Any pointers will be very gratefully received, many thanks in advance.

Helen

retiredbanker1

If you have no dependants have you thought of selling up and renting or even downsizing?

BillyTheBestCat

Hi there and many thanks for your response

We've actually only been home owners for six years, after a lifetime of renting, and we love where we are (even though it's little bigger than a shoebox!) so that's not an option, but thank you for your perspective.

At a conservative estimate, the value of the house has increased by £30,000, so it would be good to release some of that.

mjm3346

From one group  "Only if your case completes would our advice fee of £**** be payable. " I assume the same applies for at least some others (I know someone who only paid from the sum released)

Brie

No doubt you've thought what you want the money for. If it's for a great trip or whatever then fine.  Or very needed renovations.  If you need money to live on but if it's just so you have spare money in the bank then I'd suggest you wait.  And consider if there are good alternatives when you do think it's time to go ahead.

If you are on income related benefits - be it pension credits or council tax reduction they may well be effected due to the savings you have available suddenly. 

This will also have an impact should you need help with care either in the home or somewhere else.  The council will look at the ££ as being available to pay for things yourselves.  If you have a house you are living in that is excluded from their calculations.  

mcgillm

To answer your question - no charges are typically levied until the mortgage completes - the Advisor will have to make their position clear before you proceed.

Advisors will be;
Tied - Can only provide advice on one providers products
Panel - Use a short-list of Equity release providers
Whole of Market - Look at all Equity Release Providers in the market

Fees differ across the market - some tied advisors are no fee, but most take a fee and then take commission from the provider on top - it's good to see the total picture here, whilst you'll be paying the fee (or as many do, adding this to the loan), you won't be paying the commission - the provider pays this - commission rates do differ across the market so seeing the total the advisor is getting is worth doing.

The advisors should take you through a full fact find to understand your financial position and goals to assess the suitability of equity release, they should point to alternative products and options to meet your goals - make sure this happens, before recommending a product and provider.

dreaming

I have also made some tentative enquiries about equity release and one of the guides I received states that an advice fee (capped at £1690) is only payable if a mortgage is taken out with their adviser's help. It also warns that other fees will be payable to the mortgage provider and solicitors, which the adviser can confirm if you choose to proceed. So they are quite transparent if they are a reputable firm. As stated by others tough, it is something which needs some hard thinking about which is where I am right now. My reason is to be able to help my daughter with a deposit for a house but am currently saving what I can (as is she) but as she is renting at the moment (and waiting for her annual increase) there are factors which may make it sensible to buy sooner rather than later. I'm sort of keeping it in mind as a last resort. The only problem I have found is that if you enquire with a company they have a tendency to send a lot of e-mails/letters (and call regularly) even though I have said that I am not going ahead right now - so be aware!

silvercar

I’m going to move this to the mortgage board as equity release will leave a mortgage on your home, rather than a straight forward loan. There are users who are mortgage advisors who frequent that board who may offer opinions.

MWT

BillyTheBestCat said:

My main question is this - am I right in understanding that there are companies who will handle the entire process and only require payment once the equity has been released? Is that correct, please? I do understand that these companies will a) charge more and b) require that you take out a certain minimum sum. Again, am I right in this, please?

I am asking because the likelihood of our being able to raise the money for the fees ahead of time is minimal, to say the least.

The advice fee can range from zero to a few thousand, and it sounds like zero may suit you well as even though you can often have the advice fee paid once funds are released, it is still less money in your bank than you could get with a zero fee option.

So no, you don't have to pay more, you can pay nothing at all for the advice fee if you wish.

There can be a minimum amount that you have to take out, but this is something you can discuss with your advisor as it may suit you better to use a drawdown approach where you get authorisation for a maximum amount that can be drawn, but you only take out money as you need it.

There are two other fees that can come up, a product fee and the legal fees.

The product fee can usually come out of the initial amount you draw, and some products will not have a fee at all.

The legal fees will be low if you use one of the volume legal services that will often be recommended, or with some products they may include free legals so again something to talk to your advisor about.

I'd suggest you have an initial conversation with someone like StepChange as their advice is free, they just get paid by the lender if you proceed, and they can walk you through all the options and explore your needs with you to make sure the product and features you get matches your needs.

TrickyDicky101

Do you have a mortgage on your current property?  You say you've only been homeowners for 6 years so did you buy the house outright?
If you have an existing mortgage and that mortgage is a high proportion of your property's value then equity release is less likely to be available.

MWT

TrickyDicky101 said:

Do you have a mortgage on your current property?  You say you've only been homeowners for 6 years so did you buy the house outright?
If you have an existing mortgage and that mortgage is a high proportion of your property's value then equity release is less likely to be available.

Normally a good question, as any other mortgage would have to be repaid at the point when equity release is taken as they will require that there are no other mortgages.

but in this case...

BillyTheBestCat said:

We are in our early/mid seventies and own our house outright.