Equity Release

tedcrilly

Hi, hopefully someone here might be able to advise me, the question I have is as follows:

My 74 year old mother has virtually no savings, an interest only mortgage of £15000 to be repaid on her death on a house worth approx £100k

She is now in the position of needing approximately seven thousand pounds of building work done to the house, and also is now having to live on a very modest pension. I'd like to see her be able to pay to have the work done and also have some spare cash to be able to enjoy life a bit without having to constantly worry about the pennies.

Is there a way of her unlocking some of the equity in the property which is worry free in terms of her peace of mind in living there for the rest of her days, I've heard only bad things about equity release companies, I don't really understand how these work, there must surely be a way of enjoying some or all of the value that's built up without being ripped off by sharks who sound great on the daytime TV ads but in reality may not see her much better off than she is now?

dunstonh

Is there a way of her unlocking some of the equity in the property which is worry free in terms of her peace of mind in living there for the rest of her days

Yes.

I've heard only bad things about equity release companies

There isnt anything bad about it although you do find some children get angry and kick up a stink when they find out they are not getting a nice inheritance because the equity released has to be repaid plus interest.

here must surely be a way of enjoying some or all of the value that's built up without being ripped off by sharks who sound great on the daytime TV ads but in reality may not see her much better off than she is now?

With respect its clearly something you know nothing about so what basis do you have for calling people sharks?

Ian_W

I think equity release needs to be approached with caution, getting towards last resort stage, but it don't sound like your mum has too many other options.

The outstanding mortgage might be a problem, they may not do it unless she borrows enough to clear the mortgage as well as borrowing what she needs.

They come in 2 basic flavours with several variation on these themes. Reversionary schemes where a % of the house is sold and the co gets that % of the sale price when the house is eventually sold on death and Lifetime mortgages where the interest is rolled up and paid again from the sale price after death.

There's a FACTSHEET from Age Concern which explains it all in much more detail and you should make sure any co she considers is a member of SHIP which provides a code of conduct for its' members including a no negative equity guarantee.
HTH.

dunstonh wrote:

.. so what basis do you have for calling people sharks?

What d/h? Are you saying there haven't been sharks and some very dubious practises associated with equity release over the years?

auntymabel

Age Concern have a fact sheet available from their web site
http://www.ageconcern.org.uk/AgeConcern/fs12.asp

or you can phone their freehelpline: 0800 00 99 66

or try the silver savers board

dunstonh

What d/h? Are you saying there haven't been sharks and some very dubious practises associated with equity release over the years?

In the earlier days yes but that was a long time ago now. There has been no widespread mis-selling though and typically you find only higher qualified or specialist IFAs deal with it now. You should be on guard but for someone with no experience or knowledge of the market to accuse people as being sharks is harsh. Avoid the tied agents and get a higher qualified IFA to do it and there should be no problem.

Personally, I wont touch it. It isnt worth the hassle and risk. The product has a reputation for having children complain when they find out their parents did equity release and they wont be getting such a large inheritance. I do think that the current TV adverts treat it too lightly. As something you should do if you want a holiday rather than a real need.

tedcrilly

"With respect its clearly something you know nothing about so what basis do you have for calling people sharks?"

The only basis I have for using the word sharks in the sentence is the bad reputation the companies have, you're quite correct in stating i clearly know nothing about it, it's why I came here to ask for advice, and the word sharks was used as part of a question to be either confirmed as true or not, apologies if the word offended you.

Retired_I.F.A.

In those early days one of the biggest players in this field was the West Brom b/soc who were heavily fined. The real damage was where elderly folks without a mortgage were talked into taking on a mortgage and investing the capital in back to back schemes where the lump sum was put into a single premium whole of like policy and automatic withdrawals were fed into an endowment policy.

I only ever arranged one, where the retired couple with no children had a static caravan which they virtually lived in half the time on a site whereby the terms of the site meant as it was x years old it had to be replaced with a younger/new caravan. At £10,000 for a new van, a property worth £40.000 and a roll up interest rate then around 9 or 10% I was dead against it particularly as the van had to be bought from the site owners but I also thought why the hell not, it's their decision not mine to make. As the lender, C&G stipulated under no circumstances would the house ever be repossessed I set it up commission/fee free by myself, although the bloke bought me a new barbecue trolley as a thank you.

Some years after the bloke died and his wife had a change of heart saying she'd not move to a smaller house as was their intention the loan to value was still around 25% although the figures had quadrupled a do gooder friend of the widow had a solicitor lined up and was convincing the widow she had been mis sold and thousands were to be had in compensation. Worried sick that the house would be repossessed she asked me to call round and re explain it all which I did to her satisfaction.

She's still there now in her 80's I've no idea what the figures are now but the one who will have a bit of a disappointment one day is the woman who will probably inherit a fair chunk of the estate when the widow goes and she can get stuffed, as she's my ex wife

Mojisola

tedcrilly wrote: »

She is now in the position of needing approximately seven thousand pounds of building work done to the house, and also is now having to live on a very modest pension.

As well as finding out about equity release, ask at Social Services about the stay-at-home grants. My parents have just had their bathroom done and friends have had a leaking flat roof repaired and some double glazing installed. The company that organised the work on behalf of Social Services in our area is Anchor Trust (Staying Put).

Added: On reflection, I think you can contact them directly - try googling them.

tedcrilly

Thanks for all your input, we have someone from the home improvement trust popping round to discuss our options next week....