Equity release

In case you don’t get many responses - There’s quite a long recent thread on this if you look under Legal, Pensions.

If you Google ageuk.org.uk and "What is equity release" it will show you their fact sheet which explains the different types and their pros and cons. Hopes this helps.

If I didn’t have kids I would definitely consider it and enjoy the money!!

The deputy Manager at the care home Mum was in did ER with her husband. They have 2 adult daughters so they told them their plans and gave them both a nice big sum of money. One had a huge extension, the other had family holiday of a lifetime. They explained there would be nothing left after they’d gone and the girls said they just wanted their parents to be happy.

So they do several cruises a year, have UK breaks and have a new car and redecorated house throughout.

She said in her years of working in care homes and seeing so many older people having to sell their homes to pay for their care, she wasn’t having that so went the ER route.

I’m pretty sure that unless your situation is dire or you have no close family to leave money to it is not recommended.
A friend of mine approached one of these companies advertising this as she wanted to give each of her 3 children a lump sum now.
The very professional agent who came to see her was totally honest and told her it wasn’t for her and pointed out the pitfalls.
Her ACwould be far better off waiting for their inheritance in the fullness of time.
However she was then in a position to advise a friend of hers with no dependents to take it out to improve her bungalow and do very necessary repairs which enhanced her life.
Take very good advice and then decide.

We talked to Saga who gave us a list of recommended independent financial advisors to speak too.
He gave us excellent advice which we followed. We took out less than £30,000 and pay less than £100 a month interest so that the amount borrowed never increases.
The bungalow is now exactly as we wanted it. No regrets at all.

Thank u all for your advice I will look further into it now.

We are in the fortunate position of not needing extra cash at the present time. We do not have children or any close family so would consider it in the future if necessary but would take professional advice on it.

How much the interest rate rolls up dependens on interest rates.if they are low the itnerst burden will grow slowly. if they are high, all the equity will soon be eaten up.

Equity release is just a mortgage where you do not pay any interest until you die. So you still own your hme and, yes, the maintenanc e is still your responisbility an if you do not do it, and the house is in a very dilapidated state when you die (holes in the roof, extensive damp damage) I think they can do repairs and charge it to your estate.

Indeed. If you are younger, say 60s or early 70s and thinking about a lifetime mortgage, be very aware of just how quickly compound interest mounts into a huge debt. This is especially so now that interest rates are back to where they were twenty years ago.

Money Release reports that lowest Equity Release interest rate is currently 6.22% (AER) fixed for life. The highest interest rate in the market is 9.24% (AER).

In ten years time:

the debt on £50,000 borrowed at 6.22% will be £92,000.
the debt on £100,000 borrowed at 6.22% will be £183,000.
the debt on £150,000 borrowed at 6.22% will be £275,000.

the debt on £50,000 borrowed at 9.24% will be £121,000.
the debt on £100,000 borrowed at 9.24% will be £242,000.
the debt on £150,000 borrowed at 9.24% will be £363,000.

In twenty years time:

the debt on £50,000 borrowed at 6.22% will be £168,000.
the debt on £100,000 borrowed at 6.22% will be £335,000.
the debt on £150,000 borrowed at 6.22% will be £500,000.

the debt on £50,000 borrowed at 9.24% will be £293,000.
the debt on £100,000 borrowed at 9.24% will be £586,000.
the debt on £150,000 borrowed at 9.24% will be £880,000.

Unless you chose to pay the interest as we do.

That's right LadyGracie and you are limited as to how much you can borrow depending on the value of your house.

I can't see that we'd ever need to do ER but if we did we would and wouldn't not do so because of any concerns about DS inheritance.

He wouldn't want us to go without so he could inherit.

We applied for ER,( but intended to pay the interest) because the interest rate we were offered was less than on a Retirement Interest Only Mortgage, but we were turned down for technical reason to do with the amount of flat roof our house had.

We took the RIO mortgage instead and it would all have been paid back when we decided to downsize, which could be in the next year or two.

Excellent post Caravansera. I hope it makes people think carefully about what they are taking on if they are not able to pay the interest each month. Compound interest is a frightening thing.

Yes it is GSM. We learned about it at school and I hope it's still taught as it's a valuable lesson for later in life.

Which is why, had we gone down the ER route, we intended to pay the interest monthly.