[Finance] Equity release

[Harry Wilson's tackle]

A relative of mine recently went for Equity Release. In theory it was a good idea for him - he has no close family members to whom he wants to leave money to and, sadly, is very ill and has a short life expectancy. He used some of the money to buy a new car and the remaining cash will pay for everything he needs and wants. All fine, but . . .

. . . he didn't fully digest the small print and the implications of some of the conditions. The major problem is a condition about re-mortgaging. It is possible, subject to meeting the company's criteria for lending, but the salesman brushed the problem off by just saying "we won't lend on a park home". But there are many other properties they won't lend on either, including sheltered, retirement, etc. homes. He's currently living in a two storey house, with no bathroom or toilet on the ground floor and will need to move soon as his mobility is deteriorating rapidly. But now he can't buy anything suitable for him, so will have to go into residential care much sooner than he would otherwise have done.

So my advice to anyone thinking of going for this is to go through every condition and test each one against all the many situations you may find yourself in the future. All the conditions initially seem reasonable, until you start asking the "what if" questions. Enlisting the help of your Executor is a good idea, not least because there are also implications for them with these mortgages.

A long thread this but I would imagine the answers appeared early doors - this is a madcap scheme, not much better than 'payday lending'.

If you have a property that is paid for that is too big for you, downsize and use the cash wisely.

If you have a property that is paid for, don't go back in time and obtain cash for a mortgage (or some other, worse, arrangement). Remember how tough it was to pay off that mortgage. Interest always above inflation. FFS!

If anyone would like to be shot in the head, give [MENTION=38333]Swansman[/MENTION] a call. He may agree to shoot you for a small fee.

 

[B-right-on]

Everyone is different but I have no interest in mortgaging my kids’ inheritance.

Unless you are using the money to get your kids onto the property ladder. In essence, giving them it early.

Yes it'll eat away the equity left, but how much money will your kids save on rent down the plughole?

 

[heathgate]

Clearly it’s horses for courses. My very rough calcs estimate a property value of £200k and ER of £20k ??

I hope he achieves his 5% property value growth pa (or more) but there is no guarantee.

Of course there will be growth.... unless the govt builds 300k houses year, there is an insatiable demand for property, keeping the prices moving upwards... 5% is conservative.. 7-10 is more realistic assuming you dont live in an inner city slum.

Sent from my SM-G950F using Tapatalk

 

[dazzer6666]

Christ. Retiring at 54? What a loafer. I couldn't live with myself.

Not quite loafing…….doing voluntary stuff for a local school/residential facility for severely disabled kids/young adults. A million times more fulfilling

 

[dazzer6666]

Thanks. That’s helpful to see a real example. As a rule of thumb, I’d read the loan cost doubles every 15 years. So a £40k loan would equate to costing £80k after 15 years. Your example is proportionately less which is encouraging.

No need for rule of thumb, there are loads of free online calculators (40k would be 72k after 15 years if simply compounded at 4% so not far off double - increase the interest rate to 5% and it’s more than double)

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

 

[Harry Wilson's tackle]

Not quite loafing…….doing voluntary stuff for a local school/residential facility for severely disabled kids/young adults. A million times more fulfilling

 

[dazzer6666]

…and studying homeopathy

 

[Harry Wilson's tackle]

…and studying homeopathy

Come on. You don't 'study' homeopathy. You inhale it