Equity release. Should I?

My mother wanted a sum of money for a conservatory after my father died so she took out an interest only building society mortgage. The least she could borrow by this method was £30.000 and as she didn’t need the whole sum she subsequently repaid a chunk. She was left with a small monthly interest to pay with the remainder repayable on death. It was cheaper than a loan but at the time better than equity release. Not sure available now or whether age limits apply.

www.citizensadvice.org.uk/debt-and-money/borrowing-money/types-of-borrowing/mortgages-and-secured-loans/
Scroll down for brief information on Equity release.
Citizens Advice will not give advice on this as it is a financial product, so a regulated financial adviser is needed.

Definitely find a good independent financial advisor. It is well worth it.

I can only say as someone who was in a similar position last year with my daughter and grandson needing a roof over their head, that I took money out from my house as a Lifetime Mortgage and I have no regrets at all. The interest rate was very good and I have the option to pay back the interest every year so the initial figure does not grow.

Downsizing sounds easy but bungalows round here cost more than my 3 bed semi and my only other option would have been to go down to 2 bed. As it took 6 months waiting for her purchase to complete, she ended up sofa surfing while I looked after the grandson, that was stressful enough. The idea of doing that and packing up my house and completing on buying another all at the same time would have driven me to the edge!!

We took a Retirement Interest Mortgage out last year to help pay for an extension we were building. Not that different to what your mother did Farzanah and for not much more.

The interest rate is fixed for the first three years and the capital will be repaid when we move on or die. And, like your mother, I suspect, Farzanah the value added to the house by the conservatory/extension, exceeds the size of the loan.

Yes that does sound very similar to my mother’s MOnica.
I think there may be some very dodgy equity release schemes around which are not like the lifetime mortgages where people have ended up owing more than their house is worth if they don’t go into it carefully.

Farzanah originally when Equity release scchemes were first launched, they were exploititive and badly controlledd, but that was several decades ago. Now they are regulated by the Financial Ombudsman and there ae strict rules governng how they are sold.

If our experience last year is anything to go by, the rules are very stringent. We started by applying for equity release, intending to pay the interest rate voluntarily, but that foundered because more than 35% of the floor area of the ground floor of our house had a flat roof.

When we applied for the RIO mortgage we had to go all the way through the vaildation process again as it was a dififerent product (with the same lender). This despite the loan being insignificant as a proportion of the total value of the house and the repayments insignificant in relation to our joint income. For the Equity Release we had to have our own separate solicitor to advise us and we had to take independent financial advice. So the products sold now are very different to what they were in the past and the protection for those taking one out is high.

Don’t jeopardise your own future to help your daughter. If you give her the proceeds of equity release or downsizing it won’t be available for you later.

If she’s already hinting that she wants money off you now she is thinking of herself not you … what happens if she wants more?

I saw an advert on tv today for equity release and it really annoyed me because the companies name was Age something or other and I felt that they were trying to make older people think that they were something to do with Age Concern ( or whatever they’re called these days).

Sweetie222

Don’t jeopardise your own future to help your daughter. If you give her the proceeds of equity release or downsizing it won’t be available for you later.

If she’s already hinting that she wants money off you now she is thinking of herself not you … what happens if she wants more?

Completely agree with above. Daughter is `hinting` That is shocking, she is not thinking at all of your own future. Tell her to get a second job and to save hard, like most of us did

Norah

Clearly I don't understand equity release. Maybe someone clever could explain? GSM comes to mind.

GSM can be very helpful where the law is concerned but if you are thinking of Equity Release I think you need a Financial Advisor, Norah.

Oops, should have read the whole thread GSM. I thought it a bit unfair to expect you to be knowledgeable in Financial Advice Silly me

Monica, if you are not paying interest monthly/annually then you will be dealing with a compounding debt. You need to know you are comfortable with that loss of value in your house when it is sold.

If you are paying the interest monthly/annually then you need to feel comfortable not owning your home outright again.

*DaisyAnne. We are paying interest because we have a lifetime interest only mortgage.

We are very comfortable having a mortgage again, it is comfortably less than 10% of the value of the house, the monthly interest payment is insignificant, and repaying it, should we decide to downsize, will still leave us comfortably able to afford any alternative house we may want to buy.

As I have said all along. These products can be very useful and are safe to use if you think the whole project through and take proper financial advice.

Oh it was only a very basic explanation of the principles for Norah, Daisy. Financial advice is most definitely not my area.

I think if it is costing you less than any other way of borrowing then it is a good way to do it M0nica. I can't see any other reason for doing it. However, it is such a personal decision and each persons reasons will differ. All you can do is get as much advice as possible.

Germanshepherdsmum

Glad it helped. Always happy to help if I can.

... thanks from me too. You explained the scheme in simple terms (I frequently look to your posts for information in areas in which I know you have considerable expertise!).

Thanks Dickems, you’re very kind. I just try to help where I can,

DaisyAnne

Norah

Clearly I don't understand equity release. Maybe someone clever could explain? GSM comes to mind.

GSM can be very helpful where the law is concerned but if you are thinking of Equity Release I think you need a Financial Advisor, Norah.

It was merely a point of interest to how equity release works.

We have our homes willed for our daughters to dispose of as they wish, after we're gone. They may want to buy each other out, or share holiday home, who knows.

Be careful about leaving property to children jointly Norah. If they continue the arrangement, and one wants to buy the other’s share in years to come, capital gains tax must be paid by the person selling the share. This could eat into the inheritance. Make sure they take good advice. Or best of all, stipulate that the properties are to be sold when the last of you dies and the proceeds divided. They can vary the will with a solicitor’s help if they wish, but they will have had the benefit of advice.

Germanshepherdsmum

Be careful about leaving property to children jointly Norah. If they continue the arrangement, and one wants to buy the other’s share in years to come, capital gains tax must be paid by the person selling the share. This could eat into the inheritance. Make sure they take good advice. Or best of all, stipulate that the properties are to be sold when the last of you dies and the proceeds divided. They can vary the will with a solicitor’s help if they wish, but they will have had the benefit of advice.

I wrote poorly.

We have holiday homes they want to share, as we all share now, after we die. The solicitor has it organized, but as you note they will have benefit of the solicitor's help if they want to vary the will.

Daughters could fallout with the others, get divorced, want their share - need their share, become ill, run away from family craziness

I believe many-most contingencies have been sorted in our wills.

Great advice, thank you.