equity release

The short answer is that it's a very, very bad thing. If an ad for equity release comes on I find myself shouting at the TV, "Noooo, don't do it!", exactly as I do for those short-term payday loans or any type of gambling (those bingo ads, good grief!).

I knew somebody whose parents were going to sign up to a plan whereby they would gain £100 a month but they would lose the house on demise.

Their adult child offered them £700 a month but as a direct loan on the cost of the house (with no interest) which would then pass into her ownership after about seven years when they could live rent free until the last of them no longer needed the property.

This meant they had far more cash at a time when they could use and enjoy it and the daughter was able to keep her inheritance. No tax was due as it was a direct loan with no gift element involved, nor was inheritance tax due.

If the children can afford something like this, it is an ideal arrangement. The loan could be tailored to the financial circumstances of both parties, for example, the parents could receive less cash per month but for longer.

I'm not sure how it would work if a parent had to go into residential care as the question did not come up in the case of which I write.

I am not sure how else I'd dispose of any assets Flowerofthewest

I may not have assets if the home I paid for with my blood, sweat and tears over decades is used to pay for my care in later life, but if there is anything left over, my children who have also made their own way in the world without any financial handouts whatsoever, can enjoy any little windfall which comes their way. That thought makes me happy.

Sorry to disappoint Flower but I agree.

I'm at a loss as to why others seem to think that their offspring are entitled to inheritance. By the time the person who takes out equity dies the 'children' will probably be in their 50s and 60s...70s in some cases.
Such an old fashioned and archaic idea. Why should the children enjoy the fruits of their parents hard earned money. (Puts hard hat on and retreats)

Equity loan only makes sense when you know you will get a sound return on your investment. Borrowing money to increase the value of your house, (putting in a new addition) would be a good example.
You get the money back when the house is sold and possibly much more.

Equity loan does allow the lender to place a lien on your house (All loans, liens, mortgages etc. must be satisfied at time of sale). Your multi hundred thousand (euro, dollar, other currency) house serves as collateral for the Equity loan during the lifetime of said loan.
Conversely, investing in a 'used' car that will only be worth a fraction of its original cost in less than three years, is not something you want to put your house on the line for.

A new car depreciates in value the minute you leave the showroom and will continue to depreciate for years. If you want to finance a new or used car, it's better to bite the bullet and a find a good (short term) dealership or bank loan that is otherwise unsecured.

I've heard that the amount of interest charged is colossal. I had thought about it in the past I wouldn't do it now. I'll stay broke. lol I want to leave my house to my children when I pop me clogs...... unless I have to go into a home.

My father now owes 130, 000 and the interest continues to mount up, they can't afford to downsize now, I dread to think what the bill will be by the time they pass away .

In some cases it can stop the borrower from receiving any benefits they might otherwise be entitled to.
This should be borne in mind.

We consulted Saga for equity release, they recommended an FA from ‘The Hub’ he was totally independent, gave good advice, sourced a good lender, we pay less than£100 interest on our loan, so the amount we borrowed will not change. Not all Equity Release providers are out for a fast buck.

My late MIL did this. She consulted a solicitor and was advised the best was a percentage deal. This is where say you release 15% of the house's value and when you die you pay back 15% of the current sale price. Not sure if there aren't other costs though but seemed a fair way of doing it

Many thanks for the links.

Luckygirl Here is a link to the money advice service www.moneyadviceservice.org.uk/en/articles/equity-release-help

But I truly hope you will not need it. Speak to your local Age UK about you DH's assessment. They will be able to give you help and support. They also have a Fact sheet on Equity release www.ageuk.org.uk/globalassets/age-uk/documents/information-guides/ageukil6_equity_release_inf.pdf

Good luck

We took out Equity Release with Godiva in 2010, but apart from fixing our roof, we did very little with it. The idea was to reduce inheritance tax for our children, but I'm now horrified to see how much money it's gobbling up and will go on gobbling up. The other idea was that we might do something interesting - more travelling, perhaps - but sadly I lost my husband in 2013, and since then I haven't been in the mood.

Lucky that is shocking. I sincerely hope you win your case. There is no one more in need of constant care than your DH.

I wonder if it’s possible to do it more conventionally via a standard reputable mortgage lender (building society etc). I don’t know, but I’m guessing that when there is sufficient income to pay the loan, they would lend it, perhaps on interest only terms. I divorced my previous husband when I was 49 and needed to re-mortage in order to buy him out of the house. To make it affordable, the mortgage runs until I’m 76. They needed details of my salary and my occupational pension projection in order to decide if I would be able to afford it for the full period. If I wanted to take equity, my existing lender would be my first port of call on conventional terms.

I am in the position where I might have no choice but to look at equity release to pay for care for my OH - NHS is refusing him funding (I am spending money on a solicitor to challenge this) and SSD grossly underestimate his care needs and would only contribute about £35 per week to his care.

I have no idea how I find a financial adviser with expertise in this field as advised above.

The children have received money from us previously from our small inheritances, so they have no problem about it. In any event, with any luck the value of the property will rise over the years to help offset the interest/fees.

Equity Release companies, like betting offices, are only there for one thing and that is to make a profit for their own share owners.
If you have no family whom you want to leave any inheritance to then, I'd say, it could be a good idea but get advice first. If you do have family, then avoid them like the plague because it is could be the slippery slope for them losing everything..

Noooo! FiL did it and after he died MiL was unable to buy a smaller house as most of what the house was worth was owed to the company.

My late husband took out equity release two years ago. It has been building up by £10,000 a year. I have just downsized and decided to pay it off while I still had the money. My two sons were very relieved. If I had waited until August, when it would have been exactly two years, the company add on another £10, 000 which would have made it impossible to pay back. I would not suggest you take equity release unless you really have to. Why give these people big interest on your money? I think it may just be okay if you have no one to leave your money to, as it comes out of the estate when you die.

My friend's neighbour lost her house, given two weeks to vacate the premises. I suggest you really do your homework before making a decision.

Equity release schemes have been updated and changed since the 2006/2007 link quoted above. That is 12 years ago. On financial matters I would be doubtful of any financial link much more than 2 years old.

With equity release, like everything else, it depends on the circumstances. If you need money for desperately needed repairs or alterations to your house and your children are already in good jobs with their own houses, then equity release is a good solution.

There are now many variations on the basic equity release scheme. A friend has taken equity release where, the sum is quite large but she can phase her withdrawal and just take it out in small quantities as and when she needs it and only pays interest on what she has drawn down. Another has had the capital released but actually pays the interest each month so that when she dies she will still only owe the capital sum she borrowed, as she has paid the interest as it became due.

The best thing to do is talk to an independent Financial Advisor, one who specialises in this field of business.He will be able to talk you through the range of products available and what is the best one for you.

An acquaintance of mine released some equity from her property as she wanted to reduce her hours at work and is aware that she has no family to potentially inherit her flat when she's gone. I agreed that she might as well benefit from her own property. It's greatly improved her quality of life. She's got a good secure pension to look forward to in a few years. It seemed a reasonable thing for her to do. She also talked it all over with her solicitor.

We took out equity and are paying the interest off monthly, it is a minimal amount and fixed, so we only owe what we borrowed.

Marceline is quite right about it being the correct thing for some people and not for others. Ensure you’re using a fully qualified financial adviser who is able to look at all aspects of later life planning, and not someone who doesn’t, or can’t, look at the wider implications.

The amount you can release is dependent on the age of the youngest borrower, if there’s more than one, and the equity release company being used.

There are different ways of releasing equity and another option is a RIO (a retirement interest-only mortgage). It all depends on what you’re looking to achieve.

Similarly, you will need to take independent legal advice to ensure that everything is being done for the right reasons and you’re not left in a vulnerable position. There are specialist solicitors for this although most conveyancing solicitors offer some sort of service.

I have had a few cases referred to me, by some local solicitors, asking for a second opinion when they’ve been unsure as to whether things are stacking up correctly. This is a heavily regulated area and quite rightly so - please ensure you get the right advice though!

Another suggestion is that you may want to include adult children, or someone else you trust, in any discussions. An extra pair of eyes and ears never goes amiss and a good adviser will be happy to accommodate you all.