Equity release to supplement pension - pros & cons?

Why is a lifetime mortgage preferable to reversion? If you have no children or close relatives you want to inherit, then you should go for the one that gives the biggest cash sum or extra income while you live because once you have died, providing there is enough to pay your funeral expenses, you will not be here to worry about what happens to the rest of your estate and no family to worry about it either.

The moneyadviceservice site I looked at said for home reversion you lose ownership of the house and would only get 20 to 60 % of its value. Also the company would inspect the house at intervals to check you were doing the required maintenance work. So seems that the company could kick you out if the house wasn’t being maintained to their satisfaction.

Whereas with lifetime mortgage you retain ownership. However the thought of mortgage interest building up with the lifetime mortgage seems bad as well. I know you can pay the interest off with some deals, but then there wouldn’t be much point in doing it in the first place.

Neither method of equity release seems that brilliant.

Do you want to keep a portion of the equity in the house to pass to anyone at all ?
With a lifetime mortgage I couldn't get to the exact figure but they only advance about a third of the current value to you.
Why does the interest building up bother you if you don't need to retain a portion of equity to pass on. You may end up in negative equity but you'll never be expected to pay it off with a reputable company. I'm a bit confused by what's bugging you exactly.

The main concern would be that the company could kick you out of the house on some technicality (home release), or the interest building up so that the released equity and interest is more than the house is worth and the company then kicking you out or taking the difference from your savings while you were still alive (lifetime mortgage)

That used to happen but shouldn't anymore.

The best thing to do is to find a good financial advisor specialising in this area. Possibly Age UK, who do a fact sheet on this subject www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs65_equity_release_fcs.pdf

The Citizen's Advice website refers you to the Money Advice Service. Their advice can be found at www.moneyadviceservice.org.uk/en/articles/equity-release

Why not downsize or rent accommodation if you want to benefit from the value of your property in life as you have no close relatives to leave any legacy to?

I really like my house and don’t want to move. Also it isn’t huge or in an expensive area so down sizing wouldn’t really be an option, and I definitely don’t want to sell and rent. It’s just my pension is going to be lower than I was expecting it to be.

Well, read the Age UK and Money Advice Service fact sheets. They should answer all your queries and point you in the right direction to look for personal advice.

I should read more before I type my replies. Under home reversion, the company would not kick you out if you did not keep the house in good order. Instead they would get the work done and add the cost to the amount owed on your death.

Bear in mind that evicting elderly people from their house is very very bad publicity and causes outrage when it gets into the newspapers and on the news. Bad for business and bad for reputation, so it is something these companies want to advise at all cost.

You need to remember that these companies are commercial concerns and expect to make a profit. Unlike ordinary mortgages, they are not getting interest or return on their money as they go but delaying receiving any of it until you die.

For example if the borrower is 75, they could live until 85, average age expectancy, in which case the company gets money and interest in 10 years time, but they could live until 105, so the company advancing the money could end up seeing no return of any kind for 30 years. Interest rates are low now, but in 10, 20, 30 years could be back where they were in the 1980s - !0% or more. They need to factor all this in, plus compound interest on the accruing unpaid mortgage interest.

Reputable equity release companies such as Legal and General and Aviva guarantee not to kick you out if you outlive their expectations. They will not kick you out as you put it if you go into negative equity. If you really have no one to leave your house too then why not make use of the equity in it while you are alive. As I said they will only advance approx a third of the current value and provide you with a forecast of what the figures will be from year 1 to year 30 or whatever. The amount they will advance you increases with age too so it's not possible for us to say what the figure is. The only way to know for sure is to ask for an information pack which will give you the facts. How would they be able to take money from your savings with a lifetime Mortgage? That makes no sense and doesn't sound like any lifetime mortgage I've come across. It's all drawn up with the help of Solicitors you know, it's no different from any other mortgage in that respect.

Thanks Monica and FlexibleFriend. I’d looked at the moneyadviceservice website, but not the ageuk one, so I’ll follow that up.

I’m thinking a part time job may be a better way to supplement pensions and saving, rather than the equity release.