[Finance] Equity release

[Peacehaven Wild Kids]

Now I’m of a certain age I’m getting bombarded with offers of said product.
A bit of cash is always useful but what are the pros and cons?

Yes, I’m familiar with a thing called “Google” however it is peppered with sellers and bias/fake reviews.

Anyone on here in the know, that can explain it a) in English and b) as if I’m six years old?

Thanking you

 

[WATFORD zero]

This may help

https://www.moneysavingexpert.com/mortgages/equity-release/

Personally, if you really need the money, I would always look at other options first. Don't buy things you don't need because of adverts

 

[Peacehaven Wild Kids]

This may help

https://www.moneysavingexpert.com/mortgages/equity-release/

Personally, if you really need the money, I would always look at other options first. Don't buy things you don't need because of adverts

Thanks, I’ll go through that in detail later

 

[Dick Swiveller]

Something I need to read about. My mum is going to do this for my sister to get a house after a messy divorce. She wants me to have the same and, I won't lie, it would pay off my mortgage. I've always been of the opinion that it is their money and I have no right to plan for it when they die and I am a bit uncomfortable about taking it now. I'm more concerned about what impact taking £100k of equity release off a £230k odd house will have should they need care or similar going forward.

Ultimately, if my sister needs it, they will do it as she has 3 kids and they will insist I take the same. I just want to try and make peace with it, I think.

 

[southstandandy]

By and large it's a really poor way to release some cash and could cost you far more than you envisage in the long term.

If it's possible the best way of releasing some capital would be to downsize and move to a smaller property and realise some extra capital that way.

The only winners with Equity release are the companies involved in pushing such schemes. Beware.

 

[BNthree]

Only do it if you’re desperate for the cash. Even then just sell the property and move in somewhere instead.

 

[Tom Hark Preston Park]

Seems like the way to go - if you want to spend your kids inheritence upfront. Each to their own, but couldn't contemplate it meself

 

[drew]

My understanding in basic terms is that it is just a mortgage against the value of your house which is repayable when you die. Between taking out the mortgage and when it is repaid, interest will accrue each year. If you release £100K and the rate is 5% then after a year the amount owed is £105,000k. After year two it will be £110,250k and year three £115,762.50 etc etc. That said, I'm not sure a 6 year old would understand that!

Effectively, you want your house value to rise more than the interest rate each year.

If my understanding is wrong no doubt and IFA will correct it.

 

[Cowfold Seagull]

Seems like the way to go - if you want to spend your kids inheritence upfront. Each to their own, but couldn't contemplate it meself

But if you don't have kids, and aren't bothered about leaving the property to anyone? . . .

 

[Tom Hark Preston Park]

But if you don't have kids, and aren't bothered about leaving the property to anyone? . . .

Then it would be the best thing ever

 

[phoenix]

deleted

 

[A mex eyecan]

Then it would be the best thing ever

or maybe sell it and rent?

 

[jessiejames]

Not for me, however slightly different i keep getting asked due to my age if i want to take a lump sum tax free from my pensions, any thoughts on this? A couple of work mates have done this and brought static caravans as an investment.

 

[HalfaSeatOn]

It’s something I’ll consider in future years but I will make sure I am able to pay the interest so it’s doesn’t compound against the property

 

[Tom Hark Preston Park]

or maybe sell it and rent?

And see your money be drained to zero into some wallah's Property Portfolio as opposed to staying in your own home rent-free for as long as you are able? Bit of a no-brainer really

 

[A mex eyecan]

Not for me, however slightly different i keep getting asked due to my age if i want to take a lump sum tax free from my pensions, any thoughts on this? A couple of work mates have done this and brought static caravans as an investment.

if you’ve been contacted out of the blue avoid them like the plague. Too many stories of people being relived if their entire pot by scam merchants, and also people ending up with a large tax bill.

not being rude, but i wouldn’t can’t imaging a static caravan being an appreciating investment, but i maybe quite wrong.

 

[A mex eyecan]

And see your money be drained to zero into some wallah's Property Portfolio as opposed to staying in your own home rent-free for as long as you are able? Bit of a no-brainer really

true ..

 

[Icy Gull]

The only way I can see this being a good idea is if you want to stay in your house, rather than downsize and don’t have kids

 

[B-right-on]

Seems like the way to go - if you want to spend your kids inheritence upfront. Each to their own, but couldn't contemplate it meself

As the OP said, his sister needs the money now so I'm sure she'll appreciate it in the short and long term.

Also could help on paying less Inheritance Tax (depending on IHT amounts and time from gift to the time its claimed and the rules on that).

Nothing wrong with using cash out of your house now to get your kids on the property ladder. Yes you'll lose the cost of the interest off your house value. But the kids house will (should) gain in value plus how much rent they will not pay out over the time until they'll get their inheritance through the decease of their parents.

 

[Cheshire Cat]

Something I need to read about. My mum is going to do this for my sister to get a house after a messy divorce. She wants me to have the same and, I won't lie, it would pay off my mortgage. I've always been of the opinion that it is their money and I have no right to plan for it when they die and I am a bit uncomfortable about taking it now. I'm more concerned about what impact taking £100k of equity release off a £230k odd house will have should they need care or similar going forward.

Ultimately, if my sister needs it, they will do it as she has 3 kids and they will insist I take the same. I just want to try and make peace with it, I think.

Be aware of the tax implications. You might find you are paying 40% tax on it if it is classed as income in year.