Equity release for retired parents

EdInvestor

I would doubt that the interest being charged on £35K is going to reach £100K in the foreseeable future, wouldn't you agree?

At 7% it will compound up to 70k in 10 years.

lisyloo

Hi margaretclaire,

I also feel that these schemes don't give value for money.
I have ahd personal experience.

The rate on the mortgage is high and as has been demonstrated by another poster the debt can rise considerably by compond interest.
Hopefully you have got a good scheme so it will never exceed the value of the house.

If you can't downsize then another alternative to renting.

If you don't feel you have long to live (I know that souns strange) then it may be cheaper.
If you feel you have a long time to live then the "rolled up" debt is going to be alrge as demonstrated.

This may be entirely suitable for your circumstances but in many circumstances (larger houses) it's better to downside.
I'm quite young but my preference would be to go somewhere like France where property is much cheaper.

By "downsizing" I meant releasing money, which doesn't necessarily mean getting a smaller property. I also mentioned moving to a cheaper area.
That includes pretty much the rest of the world :-)

Best of luck if it's working well for you.
You might be an exception where this is the best things for your circumstances.
My personal experience is that it's very expensive.

Cheers
Lisa

margaretclare

Editor wrote:

At 7% it will compound up to 70k in 10 years.

Obviously the way to get round this is to pay the interest every year when they send a statement, especially in the early years.

Not a problem.

Margaret Clare

margaretclare

lisyloo wrote:

This may be entirely suitable for your circumstances but in many circumstances (larger houses) it's better to downsize.
I'm quite young but my preference would be to go somewhere like France where property is much cheaper.

By "downsizing" I meant releasing money, which doesn't necessarily mean getting a smaller property. I also mentioned moving to a cheaper area.
That includes pretty much the rest of the world :-)

We really did consider all the possible options, including moving to a mobile home, a retirement complex like McCarthy & Stone, and I also looked at France. A new-build one-storey cottage in vernacular style in the Pas de Calais/Nord region would cost about half the equity on this place and we'd have money to invest to live on. Drawback: although I speak the language, B doesn't - he's never been able to get his head around French and without the language he'd be very isolated even with me to interpret. We also looked at ex-mining villages in the Midlands and North and we didn't want those either!

I think that what clouds this whole issue is the idea of 'equity', which is money that we never expected to have available to us (never expected the rise in house prices!) and in fact is *not* available to us except by selling up, moving to somewhere cheaper - or else one of these schemes! And with the idea of equity comes the idea that we should leave some of it to descendants, which is not something that happened to us - no one left us a penny-piece nor did we think that anyone would!

Obviously if it was a bigger house which had become unmanageable, we would 'downsize' like a shot.

Renting....if we went to the council to rent sheltered accommodation they would want to tell us what we're 'entitled to' i.e. would probably say we're not entitled to 2 bedrooms! Renting can cost more. A guy 2 doors down rents - he was paying £600 a month rent at the time we were paying £260 a month on the mortgage.

Really, so long as we can live here comfortably, have security of tenure for as long as we need it, we don't mind. We can always pay some or all of the interest off each year.

Margaret Clare

EdInvestor

Margaret Clare

IMHO there's no need for you to worry at all.The whole point of equity release is to enable older people to generate an income (usually a top-up on pension annuities that have "run out of steam" due to inflation) for the second half of their retirement.

Although the interest rate is quite high at present it may come down in future with more competition as the business grows. If so it may be worth remortgaging.But IMHO the most importnat point is to secure the house owners' income.Questions of inheritance should always be secondary if indeed they are included in the equation at all.

Re value for money, moving abroad is a clear choice, but is a big step for those without any previous experience and who are happy with English weather.

Perhaps not so big however for those who like the heat and have joined the internet community? .

margaretclare

Hi Editor

Thanks for the reassurance.

Equity release for us hasn't so much as 'generated' an income as it has freed-up the £260 or so we were paying each month on a repayment mortgage which would have continued until we're 83. I'm still saving nearly £200 a month, so we don't really *need* the income. We're happy about the security of tenure, though.

There are some lovely little places in the north of France. Even Sangatte, which got such a bad press, is a nice little village. And the climate is not that different! But you do need the language - both of us!!

Best wishes

Margaret Clare