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  • FIRST POST
    • MSE Jenny
    • By MSE Jenny 17th Jul 06, 12:26 PM
    • 1,242Posts
    • 3,573Thanks
    MSE Jenny
    Discuss the "Equity Release… I wish I knew the answer…" Blog
    • #1
    • 17th Jul 06, 12:26 PM
    Discuss the "Equity Release… I wish I knew the answer…" Blog 17th Jul 06 at 12:26 PM
    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.


    Read Martin's "Equity Release… I wish I knew the answer… " Blog
Page 1
  • Joscar
    • #2
    • 18th Jul 06, 7:29 PM
    • #2
    • 18th Jul 06, 7:29 PM
    If you downsize, moving to a smaller home is there a Capital Gains Tax to be paid?
    HOW MUCH CAN YOU SAVE?: OLYMPIC CHALLENGE 2007
    BRONZE 10% SILVER 25% GOLD 50% PLATINUM 75%
    January 7%
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    October 68%
    • divadee
    • By divadee 18th Jul 06, 7:33 PM
    • 10,452 Posts
    • 17,891 Thanks
    divadee
    • #3
    • 18th Jul 06, 7:33 PM
    • #3
    • 18th Jul 06, 7:33 PM
    If you downsize, moving to a smaller home is there a Capital Gains Tax to be paid?
    by Joscar
    not if it is your main residence. No.

    If you own another property and rent it out etc... you would pay capital gains tax on that one.

    But you would not pay capital gains tax on the profit for your one family residence.
  • old_bonezee
    • #4
    • 19th Jul 06, 1:05 PM
    • #4
    • 19th Jul 06, 1:05 PM
    What about "private" equity release arrangements between grown-up children of the retiree who wants, and is generally encouraged, to enjoy it while he/she has it? Is there any advice available for setting up a fair scheme between siblings, some married and some not, some better off than others, which can allow for one or more children to buy fragmented equity in there parents' home without restricting there parents freedom to exercise their free will to downsize in future, and which still allows an elderly parent to have the personal pride of leaving something when they die? I would be grateful for any advise or pointers on this topic.
  • BobSMS
    • #5
    • 19th Jul 06, 3:38 PM
    Equity Release
    • #5
    • 19th Jul 06, 3:38 PM
    I recently looked into this on behalf of an elderly relative and totally agree with Martin's comments. There doesn't appear to be any 'good deal'.

    One alternative option, not previously mentioned, would be to sell the main property and invest the income as tax effectively as possible and then use the income to rent property. This enables you to have control of all of the proceeds of your property and move around when the fancy takes you.

    As the capital slowly diminishes, so does the amount that is available for councils to claim in order to pay for long term care.
    • madshopper
    • By madshopper 19th Jul 06, 5:34 PM
    • 21 Posts
    • 12 Thanks
    madshopper
    • #6
    • 19th Jul 06, 5:34 PM
    • #6
    • 19th Jul 06, 5:34 PM
    My mother in law (77) looked at equity release but was horrified at the rolling up of the interest payments so that you were paying interest on interest. She instead took out an interest only mortgage (with a reputable high st building society) of about 15% of the total value of the property which gave her a good lump sum. She has top sliced an amount off to meet the payments over 5 years and is spending the rest (hols in South Africa, China and Europe over last 2 years...) she says the property is still going up in value and when the money runs out she will take out some more...
  • Keffo
    • #7
    • 20th Jul 06, 8:48 AM
    • #7
    • 20th Jul 06, 8:48 AM
    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.
  • Saffie
    • #8
    • 20th Jul 06, 9:30 AM
    • #8
    • 20th Jul 06, 9:30 AM
    I never really paid any attention to these schemes, as i didn't need to. But then i found out that my nan and grandad had done this on their house!!! I'm all for them enjoying their money, but they took £20,000 out and 3 and a half years later they already owe £28,000!! Surely companies can't do this to the elderly?? To cut a long story short, my husband and i are now helping them to move home and pay it off before they have no home left.

    I just can't believe that people get away with doing this.

  • Juni
    • #9
    • 20th Jul 06, 11:29 AM
    • #9
    • 20th Jul 06, 11:29 AM
    Well, until this country realises that a house is a home and not a way of making a fast buck then these sort of rip-offs will continue.

    It'll all end in tears eventually.
    Debt in 1993: £35,000 | Debt in 2006: £0 | Assets in 2006: £2.3m and counting.

    Anything is possible with hard work, determination and the love of a good woman.

    There is no upper, middle or lower class. Simply those that have class and those that don't.

  • SooTee
    I don't know what the answer is but I work for Age Concern Across Norfolk on the insurance side for the over 50 market and we have an Equity Release scheme. When I went to the prelaunch, it seemed to me that though they had looked at this very carefully from the older person's view. If Martin or anyone else wants to find out about it, please ring 0800 169 5276 (ref. pe301qd) for some information to be sent.
    sootee50
  • sheilepet
    Tried this and shocked by cost
    I made enquiries about equity release and the firm were very nice and helpful but the result was that if I agreed I was virtually selling my house for £20,000 advance cash. I could not believe it. My house is only valued at £84.000 and the offer made was for £20,000 but with interest etc. when I died my family would have been left with nothing
    I would never advise anyone to take this out, there must be an easier way but so far I have not found it
  • smorelli
    Equity Release
    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.
  • rappius
    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.
    • RoryOne
    • By RoryOne 27th Jul 06, 8:56 PM
    • 18 Posts
    • 0 Thanks
    RoryOne
    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.
    by rappius
    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?
    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.
    My daughter will be very upset at the deal we have done.
    by rappius
    So why shouldn't you pull the money out of your house and spend it on yourself? Your money bought the house, not hers.
  • StuB001
    Adult offspring?
    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.
    • RoryOne
    • By RoryOne 28th Jul 06, 1:42 PM
    • 18 Posts
    • 0 Thanks
    RoryOne
    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.
    by StuB001
    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.

    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.
    • buglawton
    • By buglawton 23rd Apr 07, 6:03 PM
    • 8,713 Posts
    • 5,451 Thanks
    buglawton
    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.
  • stonehaven
    Beware Equity Release !!!! Read This First !!!!
    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
  • stonehaven
    [quote=MSE Jenny;2501891]
    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

  • jbiggin
    Advice on equity release from parents to help me onto propety ladder?
    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.
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