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House and home

Equity release

(44 Posts)
Victoria08 Sun 10-Jul-16 15:32:01

I am thinking of enquiring about equity release so I can pay of my small mortgage and maybe downsize.

Trouble is, my son and daughter say it's not a good idea.

Just wondering if any other grans have done this, and did they reap the benefits, if any.

Or is it really a bad idea. Lots of people do this, surely.

M0nica Sun 10-Jul-16 15:46:39

The problem with equity release is that the interest is rolled up and paid after your death and sometimes the accrued interest can equal the value of your house so that there is nothing for your son and daughter to inherit. It can also limit your ability to move later because if you sell your house and pay the interest that has accrued you may not have enough money to buy an alternative property.

As you are prepared to downsize, why not just do that and clear the mortgage and own your home outright without being left with financial commitments.

I would speak to Age UK. In the meanwhile download their Fact Sheet on the subject.
www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS65_Equity_release_fcs.pdf?dtrk=true

Blinko Sun 10-Jul-16 15:59:14

My parents released equity in their house to bring in some extra income in their declining years. In principle we (the offspring) had no problem, it was theirs to do with whatever they thought fit.

Within a year my father was diagnosed with lung cancer and died soon afterwards. My mother lived another eight years.

It turned out that the debt had piled up in those few years so that finance company took half the house when it was sold. I don't think things have improved very much since my parents died (seven years ago, now).

My advice would be to simply downsize, leaving yourself mortgage free.

As M0nica says, do get independent advice.

HildaW Sun 10-Jul-16 16:02:08

Basic advice....avoid it like the plague!!

Charleygirl Sun 10-Jul-16 16:07:44

Agree with HildaW, it would appear that you have other options.

A lot also depends on how old you are, the younger you are the less likely that you will gain any benefit. As stated, better to get independent advice.

annsixty Sun 10-Jul-16 16:25:04

It can stop you getting any benefits you may be entitled to, so think carefully what you do. For most people it is not a good idea.

NanaandGrampy Sun 10-Jul-16 17:03:15

Why not sell, pay your mortgage and then rent?

You can choose a place to suit your budget and don't tie up your capital again? Just a thought.

Riverwalk Sun 10-Jul-16 17:48:17

"Lots of people do this, surely"

If that's true Victoria they certainly don't come on here and extol its virtues - I can't remember a single instance.

In addition to the rampant interest, if you decide a few years along the line that it's not for you, there are penalties to be paid.

Far simpler to just sell and down-price.

GillT57 Sun 10-Jul-16 18:46:02

Without prying too much into your finances, if this is a matter of a few thousand pounds; my aunt and uncle borrowed £10000 from their son and daughter in law ( only child), to buy a better car and have a bit of spare cash. Their son and DiL would inherit anyway, and it was almost like an interest free loan against the inheritance. Everyone was happy with the arrangement and no huge interest amounts accumulated.

Elizabeth1 Sun 10-Jul-16 19:17:33

Be aware the interest of an equity release is accrued until the occupiers either go into a care home or pass away and as said it could amount to the value of the house. Please speak to an independent advisor and your family before you contemplate any equity release ad it's not for everyone.

Victoria08 Mon 11-Jul-16 13:04:22

The problem is, where I live, if I downsize, I can't get anything compared to my current house which is small anyway. We do at least have a driveway for car, whereas if we move there doesn't seem to be anywhere except street parking places.

Probably stay here when all said and done.

Recently had estate agent to do a valuation and now they are pestering me all the time.
Equity release is probably left well alone then.

breeze Mon 11-Jul-16 14:39:35

Some very good advice above. It's a minefield. You said 'we' do at least have a driveway', which indicates you have a partner? You need to be even more careful if you have. My sister and her husband took equity release so they could travel, as my sister had been unwell and 'wanted to make hay while the sun shines'. When she passed away, a clock started ticking and my brother in law had to very quickly (and now realises his choice of property was a mistake) move, whilst he was still grieving and not really thinking straight. Otherwise, he would've quickly ended up with nothing. The deal they signed up for meant once one partner died, the equity release scheme came into effect, triggering a rapid reduction in the equity retained by my bro-in-law. Which he estimated would’ve reduced to zero within 12 months.

radicalnan Tue 12-Jul-16 09:52:58

You can re mortgage into old age now.........sadly some of us may have to. Equity release is expensive to get in to and out of.

Could you take a lodger, tax free income to be had there and very useful.

Equity release does sap the life out of you once you are in there is very little wriggle room.

Been there, done that, escaped. NEVER AGAIN.

Zena510 Tue 12-Jul-16 09:58:01

Very good advice.
I've also done the research and it's not a good idea.
Downsizing and maybe considering renting long term seems a better option.

KittensandKnittings Tue 12-Jul-16 09:59:14

Not a good idea at all!

I have heard all sorts of horrible tales. I did meet someone in RL who was singing about how great it was (had just had a close call with death was buying an expensive car from me and DP), he did this to purchase the car and I honestly felt really guilty. Turns out he wasn't actually married to his partner and hadn't given a single though to how if he died first she would loose her home, but it happens to those who are married too.

I wouldn't want my mum to do this I want her to enjoy every penny she has if she needed money I'd hope she would ask me, before doing this it's not about the physical house or the money from it - I just wouldn't want to find (hoping it's not for a VERY long time yet, lost my dad 2 years ago at 61) that we would loose our mum and then not have time to do things properly and I've heard of stories where family members are kicked out on the street pretty sharpish, which is just too sad.

MTDancer Tue 12-Jul-16 10:02:41

It can be a good idea but it depends on your circumstances. Please seek the advice of an independent financial advisor

NemosMum Tue 12-Jul-16 10:12:18

Victoria - DON'T DO IT! Go and see a solicitor who specialises in 'affairs of the older person' (not what it sounds like!) and get some proper advice.

michellehargreaves Tue 12-Jul-16 10:13:02

Don't touch equity release with a barge pole. The companies that offer this, are not doing so for charitable reasons.
Downsize if you can.

JessM Tue 12-Jul-16 10:17:31

Suggest you tell the estate agent, in writing, to remove your details from their database. Did you sign anything saying you were happy for them to keep your details and keep contacting you? I don't expect so. But even so you have a right to ask them to remove them.
My hunch is that they don't bother much about details like Data Protection.

tigger Tue 12-Jul-16 10:21:02

Sound advice from NemosMum, michellehargreaves and others. My aunt took one out just for £30,000 and now owes £120,000. There will be nothing left for her son, but then it was him who persuaded her to do it anyway to bail him out of a short term situation. The only ones who gain is the company involved.

Neversaydie Tue 12-Jul-16 10:26:34

Depends if it's income or extra capital you need.If you need income a lodger (out at work all day?), possibly weekdays only would bring you in up £7000+ p a tax free
If it's capital a personal loan with interest rates as low as they are would probably be better

goose1964 Tue 12-Jul-16 10:27:16

best way to think of it is as a mortgage where your estate pays back all youe missed payments as a lump sum when you die

margrete Tue 12-Jul-16 10:31:04

May I give an alternative view of equity release?

We'd heard all the gloom and doom when we did this in 2003, but we were tired of paying £260 a month on a mortgage. We'd have gone on paying this until we were 83 and, we thought, just in time to die and leave it all to someone else.

Everything changed when my beloved younger daughter, DH's beloved stepdaughter, died very suddenly at the end of 2002.

To cut a long story short, we decided to do equity release. It CAN be a bad deal, it can be a good one, depending on the deal you get. We think we got the best possible deal. The interest on the £45K equity release was pegged to the Bank Rate. As this has been historically so low for so long, the interest has not rolled up at anything like the rate we were warned about. To balance this, property prices have risen. In this area, with development of the local airport under Stobart's control, people need homes to live in, and a 2-bed bungalow like this one is an ideal starter home. In addition, not having the mortgage to pay on the £45K has freed up money for home improvements. In 2005 we needed a new roof to replace the old asbestos tiles. We've just had a completely new bathroom with walk-in shower - this is because of increasing age and infirmity. All this keeps the value to offset against the interest owed. Now we're told, the BR may go even lower.

However, I would echo what others have said. We've been lucky - who could know that the BR would stay so low for so long? Shop around. Get proper advice. The conveyancing solicitor who did this for us had a check-list of points to go through. One was the effects on any inheritance. No one in our family on any side was at all interested - it's your money, do what you want with it. Also, we're not claiming any means-tested benefits - these would be affected if we were.

It's a very serious step to take and demands serious thought and consideration.

lilihu Tue 12-Jul-16 10:53:03

Some sound advice here.
We made tentative enquiries last year, just out of interest.
What seemed to be clear was: if you're relatively young (early 60s) with a normal life expectancy, avoid like the plague as the interest will be rolling on for many many years and the amount of cash released will be relatively small.
If you really really need a cash lump sum and have no other means of raising it, spend plenty of time researching different options and seek legal advice first.
If you are older (late70s onwards) you may get a bigger lump sum.

Check out all the details, and have questions prepared before you speak to a company. What are the interest rates, how and when might these change, when does the plan end, what happens if one person dies or gets ill or goes into a home, How are future or present benefits affected?????

Lynnburns Tue 12-Jul-16 11:22:34

Equity release is definitely not for everyone and careful scrutiny is required. However it is highly regulated now and to give advice advisers have to sit additional specialist exams.
I have seen it work wonders for some people- allowing them to continue to live in their home, and also had clients where it would just not work for them. Although I always encourage people to involve their adult children, you must really do what you feel to be the best for you and what you want. After all - life is for living.
Always always take advice from and independent financial adviser.
(*should 'fess up that I am financial adviser well as an adoring gran! )