equity release

I haven't but I know others have so am replying to bump the thread a bit.

There was a thread about this not long ago. It might even still be active if you look.

You must get advice from an independent financial adviser. This area is an absolute minefield. The risks are enormous.

I honestly wouldn’t use the equity in your house to buy someone else a property. The interest rates are often high & you’ll lose more money than you give to your relatives. Very risky.

Equity release is a decision to be taken only after thorough research, impartial advice, and with the full agreement and understanding of all involved.
Even then, it is not something I would do to help someone buy a property.

I looked into it to help my son buy a property and realised it was far too risky and I am certainly not going to do it

A lifetime mortgage is worth looking at.

The interest is low, currently, and can be paid monthly or rolled up and added to the amount borrowed.

I started a thread on ER a few weeks ago. We are/were getting ours to pay for an extension and I was complaining about all the hoops we had to jump through in relation to the property.

It has turned out we cannot have ER on the house because more than 25% of the roof is what they describe as a 'flat' roof. ie, it has a shallow pitch and is on a single storey extension. However, all is not lost, we are now getting a Retirement Interest Only mortgage, why the 25% 'flat' roof bothers one but not t'other defeats me.

I think some posters on thread are being alarmist about ER. At one point it was an unregulated jungle full of predators, but it has been reformed and the rules are tighter, but, as with anything you need to take care.

The main thing to do is go with a well known, well established provider. We chose the safe route. We approached the bank where I hold my current account, have savings invested and have previously had a mortgage from. We have confidence in their probity.

They are quite happy for people to use ER to fund house purchase for younger family members. However they will check very carefully to ensure that you are doing this entirely voluntarily and understand what this involves. They want to make sure that you are not being coerced into the decision by other members of your family.

These checks are irritating when you are fully compos mentis and have thought hard and carefully planned everything, but one reads too many stories of older people cheated out of money by dodgy builders and avaricious relatives to do other than comply with them graciously.

How much they will lend you depends on the value of your house and your age, not your income. They will not lend more than half the value of the property and like it to be a nice traditional house with brick walls slate/clay tiles and no more than 25% of the house can have a 'flat' roof.

Age UK have a fact sheet on equity release www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/large-print-factsheets/fs65-lp-equity-release2.pdf Download this. You will find it very helpful.

As always be careful there are plenty of sharks out there, if you get equity release for half the house there may be very little left when you die or move out because the expenses are high.

That aside, if you want to help fund a purchase for the younger generation it is a better option than being a guarantor, which is another minefield.

It is also a good way to avoid Inheritance Tax.. A wealthy friend has taken out ER to help her niece and nephew to buy houses. As a result, when she dies, the value of the estate will be below the Inheritance Tax limits (unless house prices keep rising then she could find herself back over the limit).

I think the seven year rule comes into play ie if you give large sums away and you don’t live for seven years, your estate could still be liable to attract inheritance tax. It’s a minefield really.

*Bobbysgirl119. I agree, but she did it in her late 60s and in excellent health, so the chances of living the seven years were high and are now nearly up.

I don’t think this has been mentioned, but if there is any likelihood of the house owner needing to go into care, and not being able to be self-funding, surely there is a risk of Deprivation of Assets coming into play?

Indeed there is.

Cabbie This would only apply if the person could be proved to have taken out the loan in order to avoid care costs and would be very difficult to prove.

If it had been taken out some time previously before the need for care was known, then it would be nigh on impossible, if it was taken when the person could foresee a need for care, then the rules would apply as with any other assets disposed of with intent to get free care.

Personally I would do almost anything, to avoid having to depend on the state to fund my care, the level of care they fund is so minimal and grudging.

Cabbie21

I don’t think this has been mentioned, but if there is any likelihood of the house owner needing to go into care, and not being able to be self-funding, surely there is a risk of Deprivation of Assets coming into play?

Local authorities are not tied to the 7yr rule claiming for care costs, they are cash strapped and there are no set rules, you have to prove you were not deliberately depriving assets.

Unfortunately these days you don’t have to be wealthy to fall foul of the iniquitous Inheritance tax.

I’m sure everyone would prefer their hard earned money to be spent as they see fit during their lifetime, rather than the taxman getting his hands on it when they die.

It’s no contest!

I’m sure everyone would prefer their hard earned money to be spent as they see fit during their lifetime, rather than the taxman getting his hands on it when they die.

I would rather the tax men took all that was necessary to pay for the national and local infra structure needed to ensure everyone in the country can live without fear of poverty, in a decent clean well-serviced environment, whether that be hospitals, roads, or rubbish collection.

So please take the 'everyone' out of your para and replace it with some.

M0nica

^I’m sure everyone would prefer their hard earned money to be spent as they see fit during their lifetime, rather than the taxman getting his hands on it when they die.^

I would rather the tax men took all that was necessary to pay for the national and local infra structure needed to ensure everyone in the country can live without fear of poverty, in a decent clean well-serviced environment, whether that be hospitals, roads, or rubbish collection.

So please take the 'everyone' out of your para and replace it with some.

I’ll take everyone out and replace it with “almost all”
there are a misguided few who think the government uses wisely.

Tax wisely

I said nothing about this government or any other, but teachers and medical staff must be paid, bins emptied, roads mended. All the things that make life supportable anywhere. This is regardless of the government.

The government of the day makes allowances that we can all take advantage of and avoid paying tax. If it wants more it can change the rules, then we can all decide to vote for them or not, if you wish to give them extra feel free I don’t expect the queue is very long.

All very commendable I’m sure MOnica but I beg to differ for the simple reason that by the time any of us manage to build up any savings, that money will already have been taxed, umpteen times, to pay for the services you mentioned.
There is income tax, capital gains tax, and others so the taxman has already helped himself to a tidy sum before we even get a look in.

Don’t we all want to leave something to our families? Of course we do.

I think you’ll find most people agree.