Discuss the "Equity Release… I wish I knew the answer…" Blog
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This may not suit everybody but,
If the value of your property is sufficient sell it, downsize but use the equity to buy and rent out another house. This would top up current income and still have the money invested in bricks and mortar.
I have managed to buy three additional houses by releasing the equity in my home although i have gone for a longer term approach and taken additional mortgages to do this.Ultimately all three houses are self sustaining and in approx twenty years when I cash in I anticipate a profit of approx. £1000,000.
Ok I will have to pay capital gains but the way I see it is that I will still own all the equity of my home and the rest of the money has been made off the back of the banks and my tenants.0 -
I am one of the fools who subscribed to a shared appreciation mortgage (SAM) and we took out a loan in 1997 of £66250 and now the Bank of Scotland owns about half of our house. It has made over a quarter of a million so far and I can see no way out apart from selling up and moving to a very much smaller property in a place we do not wish to live.
I was advised to take this loan by a respected IFA and it was a huge mistake. Beware! The only silver cloud is that the bank will get our money instead of the Inheritance tax people. My daughter will be very upset at the deal we have done.0 -
I'm trying to understand these schemes (especially SAM). Why is it such a bad deal? Isn't (bluntly) the idea that you stay in the house until you die and then the banks share is paid off?rappius wrote:I am one of the fools who subscribed to a shared appreciation mortgage (SAM) and we took out a loan in 1997 of £66250 and now the Bank of Scotland owns about half of our house. It has made over a quarter of a million so far and I can see no way out apart from selling up and moving to a very much smaller property in a place we do not wish to live.
I was advised to take this loan by a respected IFA and it was a huge mistake. Beware! The only silver cloud is that the bank will get our money instead of the Inheritance tax people.
OK, the bank has made a quarter of a million, but presumeably you have made a proportionate amount too? In theory house prices could have gone down and the bank would have lost money.
So why shouldn't you pull the money out of your house and spend it on yourself? Your money bought the house, not hers.rappius wrote:My daughter will be very upset at the deal we have done.0 -
If the property owners have adult sons/daughters who are financially viable (& can afford it!) then the cash could be released by them purchasing the house.....this keeps the parents in their home, releases equity & protects a 'family' asset....that could reduce IHT in the right circumstances (i.e. if some (or all) of the equity released is used as income....and could also be useful in other financial circumstances.....buying a holiday home overseas. Typically, the parents' house can be purchased at a 'soft' price, i.e. below market value, resulting in little or no deposit required.0
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I'm looking at this at the moment - there are complex tax issues: Pre-Owned Asset tax & benefit in kind tax (if you don't charge parents market rent) etc. Plus is the price is obviously 'soft' then you're back with IHT issues.StuB001 wrote:If the property owners have adult sons/daughters who are financially viable (& can afford it!) then the cash could be released by them purchasing the house.....this keeps the parents in their home, releases equity & protects a 'family' asset....that could reduce IHT in the right circumstances (i.e. if some (or all) of the equity released is used as income....and could also be useful in other financial circumstances.....buying a holiday home overseas. Typically, the parents' house can be purchased at a 'soft' price, i.e. below market value, resulting in little or no deposit required.
We're trying to figure if my mother could sell her house, give us the money, and then we buy her another house (she wants to dwn size anyway). As long as she lives for 7 yrs this looks like it might work, although it still seems like there might be BIK tax for her.0 -
What happened to the dowloadable PDF doc on Equity Release? The link in Martin's blog goes to an FSA site with no mention of such a doc.0
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Dear All !!!!
Before you do anything you may regret, read the example I am about to show you and think about it very hard.
EXAMPLE.........
'The Stonehaven Equity Release Company'.
Phone them up and ask them who is the money behind the product.
They will say 'Major inverstors', but they won't say who. Hmmmmm !!
The truth is, it's 'The Abby'.
Who owns 'The Abby',....... 'Santander Bank'.
Ask Either of them if they finance Stonhaven Equity Release, they will both reply NO !
Why would they fib ???
Because they both know 'Equity Release' is a dirty game often making bad deals for those who can least afford it (Elderly people).
So they finance 'STONEHAVEN EQUITY RELEASE' to do their dirty work and make profits without blemishing their 'good reputations' !!
Beware, please. Think long and hard before taking this option !!!
Banks are Greedy, Greedy, Greedy and these options make huge profits (FOR THEM, NOT YOU)
Mr. E.R. Banker0 -
This is the discussion to link on the back of Martin's "Equity Release… I wish I knew the answer… " blog. Please read the blog first, as the discussion folows it.
Dear All !!!!Before you do anything you may regret, read the example I am about to show you and think about it very hard.EXAMPLE.........'The Stonehaven Equity Release Company'.Phone them up and ask them who is the money behind the product.They will say 'Major inverstors', but they won't say who. Hmmmmm !!The truth is, it's 'The Abby'.Who owns 'The Abby',....... 'Santander Bank'.Ask Either of them if they finance Stonhaven Equity Release, they will both reply NO !Why would they fib ???Because they both know 'Equity Release' is a dirty game often making bad deals for those who can least afford it (Elderly people).So they finance 'STONEHAVEN EQUITY RELEASE' to do their dirty work and make profits without blemishing their 'good reputations' !!Beware, please. Think long and hard before taking this option !!!Banks are Greedy, Greedy, Greedy and these options make huge profits (FOR THEM, NOT YOU)Mr. E.R. Banker
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I am finding it hard to get on the property ladder even though I have saved £35000 for a deposit, which only covers 10% of the mortgage. A mortgage broker suggested asking my parents, 62 and mortgage paid, about releasing equity to help bump up my deposit so that I can afford the mortgage repayments. I need as much advise as possible because in principle they would like to help, and see the money as being my inheritance anyway, but are nervous as to what the downsides are. They may decide to sell and move at some point, which is a factor, and I want to look at this as more a loan than necessarily an inheritance.0
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My brother and I have purchased 50% of our parents home with an interest only mortgage. We payed slightly under market value, which may cause problems in future (depravation of assets), but, hopefully, the more years go by, the less likely a problem it will become. We all now each own 25% of the property as tenants in common, so when the first parent passes away, then their quarter share passes to my brother and me via their will, and not to the surviving spouse. This reduces the chance of most of the property ending up in the governments hands to fund a care home. My parents, have agreed to gift to us £3000/year for a set period, to cover our mortgage payments for about 10 years (£3000 is allowed to be gifted each year without any depravation of assets implications).
So now, my parents have money. My brother and I have a reasonably small interest only mortgage, which is being funded for 10 years by my parents ( bit like a loan). My parents can spend money improving their home, knowing that we will benefit from increased value. My brother and I have a growing investment.
We will be liable for CGT on any gains when we sell, but as we only owe 25%, and hopefully it will be in more than 10 years, hopefully it won't be too much. The goverment will probably get the value of some of the house, if one or both end up in care, but they won't get all the house!
We have tried to hedge our bets on all possible outcomes (which isn't too nice, when you are talking about your parents lives) to keep as much out of the governments and taxmans hands.
My financial advisor had never done anything like this before, neither had our solicitors. The only lender we could find to do this was the Dunfermline (all 4 names appear on the mortgage).
It works for us, it won't work for all.
Brilliant Solution, should be used on Martins Homepage.
I wish we could be better Educated at School In these matters, plus people are to sensitive to discuss real life issues until its all to late in life!0
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