Equity Release

[tastyjane]

Not sure if anyone can help with this but my Mum is 69 and is still working full time. She split up with her husband 6 years ago and ended up having to take a £40K mortgage on her house which is now worth around £160K. She also took a car PCP out last year which she pays back at £200 a month. Her mortgage is interest only and is £150 a month.

She is fine for money at the moment as she has both her state pension and a good private pension which between them comes to around £1200 a month and then she earns £1000 for working 4 days a week.

Having just hit 69 she really wants to give up work - she had been promised to go to 2 1/2 days but her employer (the council) have been trying to organise this for the past 3 years and have still not sorted it!

I have been to see her today and she is talking about looking into Equity Release on her house - I know nothing about these type of mortgages apart from having a gut feel that it isn't a good idea.

Does anyone have any information as to the pros and cons of doing this? To be honest I wish in some ways she would sell her house release all the equity and rent somewhere lovely and live on the rest and really enjoy herself.

Jane x

[ken100464]

Re: Equity Release

Be one or two along shortly Jane am sure.

For what its worth my gut instinct would be after working all your life why go to release that money for the Banksters to feed off.

And the fact she is on interest only unless she has a vehicle in place to pay back the capital is what most in the press are saying is probably the next scandal to engulf our dearly beloved banking industry.

They really dont know how low they have sunk. A profession most of the public rate below a politician. Now thats some going.

Renting is part of the inate snobbery successive governments have encouraged with homeownership. People look down on renters. For many it could and should be a better way in life than the millstone of a home that they cant really afford.

The government should crack down on the rental market more. Abuse from both sides but there shouldnt be.

[MrsD]

Re: Equity Release

Jane she should think very carefully about taking on debt at her age. She would be better to sell the house and rent, believe me if I could do it all again, I would not be buying a house.

I'd much rather have the money under the bed than invested in a house which is just a great big target for unscrupulous DCAs, (and you never know when you are going to be at their mercy).

Does she have something in place to pay off the mortgage?

[pompeyfaith]

Re: Equity Release

Indeed she should have an endownment insurance policy in place, however many have been under performing and not reaching the value of the mortgage it is why I switched to a repayment a few years back.

My home is an ex council house and I have a mortgage to 45% of the value of the house so one might think a good deal, however over the years it has cost an arm and a leg to bring it upto a decent living standard plus it has lost about 10% of its value since over the past 5 years, however I am a still a long way of negative equity yet and keeping my fingers crossed that it pays a return when I do eventually sell.

[pompeyfaith]

Re: Equity Release

Just tried to get the latest guidance on equity release for you Jane from the OFT website but it is down for maintenance at the moment so will pop back later for you.

[mgfboy]

Re: Equity Release

Like any financial product there are people it works for and some people that it doesn't.

It a specialist area of advise and you need a specialist qualification that most IFA's don't have.

Find yourself a good equilty release specialist and they will be able to go though the good and bad points.

Everybody on this formal has different view and some are quite negative when it comes to anything in the financial sector and this colours their views, so dont discount anything until you now all the facts.

[mgfboy]

Re: Equity Release

Indeed she should have an endowment insurance policy in place, however many have been under performing and not reaching the value of the mortgage it is why I switched to a repayment a few years back.

You don't have to have an endowment in place if you have a interest only mortgage, if fact some people have no repayment vehicle in place at all. It all depends on their requirements and their circumstances.

[tastyjane]

Re: Equity Release

Thanks all; she doesn't have a repayment vehicle in place and that's a worry to us all - it was a necessity when she took it out as her husband walked away and left her and to be honest it was the only way we could get her into a house of her own in an area she would be happy!

She has an appointment with an IFA recommended by Age Concern next week but my brother has done some initial searches on the internet and it seems the maximum she would get as Equity Release would be £55,800 and out of that I would assume she would need to clear her £40K mortgage.

I wish she would sell the house and bank the £110K and rent somewhere lovely, even if she pays a little more per month, and then enjoy some of her capital. If she lasts longer than her money we would have to re-assess her living needs and she could perhaps live with one of us but by then she may well need to anyway. Her two pensions mean she could pay her bills quite comfortably and it would only be the rent that ate into her capital.

Everything about Equity Release feels so wrong to me

Jane x

[mgfboy]

Re: Equity Release

Thanks all; she doesn't have a repayment vehicle in place and that's a worry to us all - it was a necessity when she took it out as her husband walked away and left her and to be honest it was the only way we could get her into a house of her own in an area she would be happy!

She has an appointment with an IFA recommended by Age Concern next week but my brother has done some initial searches on the internet and it seems the maximum she would get as Equity Release would be £55,800 and out of that I would assume she would need to clear her £40K mortgage.

I wish she would sell the house and bank the £110K and rent somewhere lovely, even if she pays a little more per month, and then enjoy some of her capital. If she lasts longer than her money we would have to re-assess her living needs and she could perhaps live with one of us but by then she may well need to anyway. Her two pensions mean she could pay her bills quite comfortably and it would only be the rent that ate into her capital.

Everything about Equity Release feels so wrong to me

Jane x

Your correct in the fact that the mortgage would have to be paid for and she could keep the balance. I have seen this work for some people very well, but they do tend to be older, but as I said you need to go though all the options.

I wouldn't have a problem recommending equity release etc to the right client if it meet the requirements.

I've seen cases where people haven't been able to heat their homes, but are sitting on 1/2 million in bricks and morter and you know they haven't done anything about becuase they want their kids to have something, it drives me mad!!!!

[tastyjane]

Re: Equity Release

Mgfboy, I understand it is a good option for some and it's not about us wanting the equity in her house when she goes. I would much rather she could enjoy that money herself having nice holidays and living worry free for as long as she can :-)

If she didn't have the mortgage I think it would be a much better option for her to be honest, thanks so much for taking the time to reply.

Jane x

[evilcartman]

Re: Equity Release

Jane she should think very carefully about taking on debt at her age. She would be better to sell the house and rent, believe me if I could do it all again, I would not be buying a house.

I'd much rather have the money under the bed than invested in a house which is just a great big target for unscrupulous DCAs, (and you never know when you are going to be at their mercy).

I totally understand where you're coming from there. However, the other side of the coin is that rents are EXTORTIONATE nowadays, precisely because so many people can't afford to buy their homes and are at the mercy of buy-to-let landlords.

I sold my mortgaged house to escape the mortgage trap and was able to buy a house outright with what was left of the proceeds after redeeming the mortgage. I like the security of never having to pay rent or a mortgage again.

[MrsD]

Re: Equity Release

ah but EC you're obviously happy in that house and want to stay there, that doesn't apply to everyone especially when you get a bit older.

[diddlydee]

Re: Equity Release

Research, research, research, that is all I can really recommend.

At 69 years of age, your mum could have 20+ years of life left and therefore that will be taken into account when deciding how much money she could have.

I'm pretty sure there are some schemes out there which could potentially, if mum lives long enough, have so much interest charged that there could even be a shortfall on the sale of the property.

I know my grandfather looked into a particular scheme when a family "friend" recommended it to him. He was 90 years old and would be given £80,000 for basically handing over his house which was worth £200,000. He only wanted £5,000 to install central heating!

After persuading him to seek independent financial advice, the scheme was ripped to shreds and he decided against it. Each to their own, but make sure mum is fully versed so she can make a decision right for her.

diddly x

[evilcartman]

Re: Equity Release

ah but EC you're obviously happy in that house and want to stay there, that doesn't apply to everyone especially when you get a bit older.

I wouldn't say I was THAT happy in it, it's in an unpopular area that will make it hard to sell should I need to move again in the future, but needs must. I was getting into arrears with the mortgage and the DWP "help with the mortgage" was coming to an end, so I had to do something.

I did actually get a new job shortly after the sale, which almost made me wonder if I'd done the right thing. However, that job fell through within a few months and I would have been really in the shit now if I hadn't sold up.

[mgfboy]

Re: Equity Release

Research, research, research, that is all I can really recommend.

At 69 years of age, your mum could have 20+ years of life left and therefore that will be taken into account when deciding how much money she could have.

I'm pretty sure there are some schemes out there which could potentially, if mum lives long enough, have so much interest charged that there could even be a shortfall on the sale of the property.

I know my grandfather looked into a particular scheme when a family "friend" recommended it to him. He was 90 years old and would be given £80,000 for basically handing over his house which was worth £200,000. He only wanted £5,000 to install central heating!

After persuading him to seek independent financial advice, the scheme was ripped to shreds and he decided against it. Each to their own, but make sure mum is fully versed so she can make a decision right for her.

diddly x

Most of the good schemes have a no negative equity clause in them, so even if you live to 200 on your death there would be no come back.

Have a look over this site , it gives alot of info

http://www.equityreleasecouncil.com/home/