Discuss the "Equity Release… I wish I knew the answer…" Blog
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My brother and I have purchased 50% of our parents home with an interest only mortgage.
Like many such arrangements there are several pitfalls in these deal that haven;t been mentioned.
Not only will it be taken into account under dprivation of assets, it will also fall foul of the inheritance tax rules if the parents are not being charged rent for the half they don't own.We payed slightly under market value, which may cause problems in future (depravation of assets)
This is a dangerous arrangment for the surviving parent.If either of the children get divorced or go bankrupt, the parent could be forced out of the house.An arrangment like this needs to be written "in trust" to protect the parent.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.
No.You are mixing up deprivation of assets with IHT.The gifts will be seen as deprivation.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).
Do you expect to sell before you jointly own 100%? The longer you own it, the more likely it is the value will rise and the CGT along with it.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.
As it's out of line with normal practice that's not surprising.Did your parents have independent legal advice?It would appear not. :rolleyes:My financial advisor had never done anything like this before, neither had our solicitors.
Well, well, what a coincidence.The only lender we could find to do this was the Dunfermline (all 4 names appear on the mortgage).Trying to keep it simple...
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Equity Release should never be taken lightly and Martin is right, you should always look at the options first. Some plans do erode the Equity In your home that you have taken years paying for, plus interest, but unless you want to leave it to the kids who you have supported until they are 30, then why not use this asset to make your life easier?
Some plans allow you to pay some or all of the interest to stop the erosion of Equity.All SHIP lenders must give you the lifetime occupancy guarantee and no-negative equity guarantee, which means you stay in your own home until you die or go in to care and your family are protected from any outstanding loans on these plans.These are now being used to help families get on the housing ladder or clear debts, pay for medical help that they could not afford, pay for holidays, home improvements or just increase your income to generally make life more bearable.Some plans even allow you to take Equity from your buy to let properties or second homes.
You should always have whole of market independent advice from qualified advisers who will tell you whether these plans are suitable or not,and research all the different lenders for you, then advise you which plan suits you best.You should never be pressured in to doing this, by advisers or family.Ask for a face to face meeting as this needs explaining very carefully which takes longer than a simple phone call.I also suggest that you use a specialist firm that deals with these on a regular basis.0 -
Not everyone can move house. We were forced to take out a new mortgage to pay for disabled facilities (the grant was means tested on our incomes at the time). We will not be able to pay this off when we retire next year- we thought that one of these schemes would be the solution. Any advice?0
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My husband and I negotiated an Equity Release, (they called it a Lifetime Mortgage) in October 2003 with Norwich Union (now Aviva) because we wanted to have a couple of small improvements done to our property and to buy a new car. This was always going to be a non-repayment type of loan. Although we were mortgage free at the time, my husband was very much against taking on an HP agreement because he had already been medically retired on ill-health grounds, although I was still in employment. The house was valued and we borrowed the lesser of the 2 amounts we were offered. During the lengthy conversation with the agent from Norwich Union, we were asked specific questions, as to any dependent children and whether they would expect to inherit after our death. Our reaction was to the effect that we would hope there would be some level of equity left in our property following our demise. We get an annual statement from Aviva and I have never understood why there are 2 separate amounts of interest being added to the original loan, one of these relates to the Retail Price Index. When we got the annual statement last November, I was astounded to see that the amount we now owe has increased to the point where the original amount we borrowed has all but doubled, due I expect to the rising RPI. While the terms of this Lifetime Mortgage are that Aviva would never be entitled to ask for more than whatever value our property realises when it is finally sold, my concern is now that if the RPI continues to increase, in another 10 or 15 years, there will be nothing left within the value of our property to pass on to our kids, which is absolutely not what we intended. Would anyone consider that, even in the broadest sense, this Equity Release has been "mis-sold?"0
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My father took out an equity release for £32,500 over 10 yrs ago and as he has now just passed away it is time for payback. The issue we have is the RBS paperwork indicating that the value to payback is either 3 X the amount loaned ie £130,000 to payback or 75% which would mean they take £470,000 based on the current value of the house - someone please tell me this can't be right?0
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Can anyone direct me to any information regarding equity release schemes within the UK which deal with property not in the uk but property in Spain please???0
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Can I just raise a personal example to warn others! I advised my parents against equity release but I had no compelling argument and Dad wanted a new car! To shorten a long and depressing story - Dad died - Mum's health and happiness deteriorated! They had already moved into a flat! the fact was that she could not use any of the equity to move into a home or a sheltered flat! Most such flats have some kind of covenant! The company who now owned the debt would not let her move into any flat involving a covenant! So she was left looking after herself - desperately longing for companionship -unable to purchase a flat with some care, some shared facilities! She had to try and move into an Abbeyfield Home! The Abbeyfield doctor objected and she was stuck managing on her own until she died! NONE of this is clear in the literature - I did not care at all about the house/flat/money! I hated being told that I had not advised my parents against the scheme! I hated her crying and being unable to find a way to move! Please remember the possible changes and traps when undertaking such an arrangement!0
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Me and my partner have just moved in with his mum. His dad passed away not long ago. He took out equity on the house which now stands at 85000.
Me and my partner are trying to figure out how to pay off this equity ie:get a mortgage and buy the house under value (His mum will still live here)
Does anyone have any idea of how we could do this as in a few years time, the equity loans company will own the home and we will have to move out with no funds of buying another0 -
Pricey1991 wrote: »Me and my partner have just moved in with his mum. His dad passed away not long ago. He took out equity on the house which now stands at 85000.
Me and my partner are trying to figure out how to pay off this equity ie:get a mortgage and buy the house under value (His mum will still live here)
Does anyone have any idea of how we could do this as in a few years time, the equity loans company will own the home and we will have to move out with no funds of buying another
I'd read through the thread here to get an idea of what pitfalls there are, or at least might be.
You really need independent advice though. NOT "free advice" from someone selling you anything.0 -
Similar to my parents who passed away recently. We knew they took some equity release but was absolutely horrified that the house was sold for 525 thousand and they have had to pay back nearly 400 thousand back! They died within 6 months of each other and of course are family were sad but now the 4 siblings can’t believe they’ve borrowed so much.we found out they borrowed 40!k when retiring at 60, to go on several holidays which was fine of course they did say they took a small amount out but they took more out at 75 partly for private operation and then holiday and other luxuries which we didn’t know about, as they live till 90 the money they owed was 80 percent of the home value! It’s left very little left which has left the family annoyed with them which isn’t the way it should Be. These companies are absolute robbing gits and it needs to be stopped0
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