Poorest man in the graveyard

bobmac

bobmac

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At least that's the plan.
With no dependents and my house paid for, I'm looking at equity release and I'm hoping someone on here can advise me please.
I've done a fair amount of research so I know roughly what's what but what's in the small print?
Has anyone been through this process who can say good or bad idea?
Thanks in advance
 
Hi Bob,

I’m a financial adviser with equity release qualification. I don’t advise on these products in my current role but can answer any questions.

Obviously headline is that you are careful with the interest rate. Generally it will be a fixed rate for ever. May not be that important if you are just looking at ‘taking the max’ and effectively content to lose the entire value of your house.

products will provide an initial lump sum. This will be a bigger percentage of your house value the older you are. Will generally be less attractive for people at or around age 60 than 70.

Some products will allow facility to draw more in the future. This is possibly a red herring but could work out if you weren’t taking the max and had a big planned capital expenditure, but is reliant on value of your house increasing, hence it’s not likely to be something you’d want to rely on.

Most products will also have a negative equity guarantee which means your estate will never be liable for any additional monies after the sale of your house. Eg if you lived to 100 and the interest rolled up was more than the value of your house, the mortgage company get the property value only. Also never any compulsion to sell your house while you are living in it.

Most products are not set up to pay a regular income and if income is your requirement then it is likely to make sense to take your capital and do something with it, like some kind of investment portfolio or bond. Your funds will likely provide you with more income this way than just sitting in the bank for the next 15 or 20 years.

Also I’m biased but would suggest taking formal advice from an adviser. Might cost a bit but they will source the correct product for you and do a lot of the heavy lifting in terms of admin. Happy to have a further discussion as I have a very good friend who does ER and she’d hopefully be able to help you.

Good luck
 
Fixed rates are really good at the moment Bob, so a good time to get advice on equity release. I understand you have to get advice, and can not apply direct which is just as well.

You do need to be careful if you want to repay the loan early, as there can be some expensive penalties. Get professional advice !!
 
Thanks guys.
I have read somewhere that you have to have at least one face to face meeting with a expert adviser and or solicitor to make sure you get the right package so happy to pay for that.
I've seen the interest is down from 3.8 to 3.4% so good news.
My neighbour has just taken some equity but he has grandchildren so in a different boat but said for me it would be perfect.

Now, where's that BMW i3 :)
Ps
My house is about £150,000 I'm almost 60 and an online calculator has suggested I could draw £48,000.
Would there be any reason not to take the full amount bearing in mind the thread title?
 
Hi Bob
It would depend a lot on your current income position, if you have enough coming in to maintain your current lifestyle then it might be better to wait until your pension kicks in.

Then you will be older and be able to take a bigger lump sum.

I’d generally say that 60 is a bit early to be doing equity release unless you are skint.

48k sounds a lot, but if you are looking at that to fund the rest of your life then it won’t go far.
 
I am an ex financial adviser and no longer qualified so anything I say is based upon personal experience only.

I needed to do very little research so new the pitfalls of it, main one being that if you fail to make any repayments or pay the interest on the loan you could end up not owning any of your house.
I reckoned on it taking about 14 years with making such payments to lose half the value of the house and it is an exponential curve ( I borrowed 20% of the houses value).

However in the time since I did it the value of my house has increased by a greater amount than the increase in what I owe.

I went with Legal and General with their lifetime Mortgage offer with a fixed rate of interest for the rest of the time I owe them money.

All terms and conditions are very well set out and they insisted on my having a Financial Adviser (appointed and paid for by them)

Their is a minimum term and a maximum repayment level (within that term) which can be made without penalty.

Watch out for some that advertise as they charge a fee for any consultation, which with at least one was a percentage of the amount borrowed.
 
murphthemog said:
Seems madness to me to take risks with where you live, when you have finally paid it off. The one thing they can't take off you, and you put youself in a position where they can. Not for me.
Click to expand...
If Bob has no dependants and could do with a cash boost whats the problem, he can live in the house and doesnt have to make repayments. If he does nothing his money will eventually go to the crown or some long lost second cousin twice removed.
 
murphthemog said:
Seems madness to me to take risks with where you live, when you have finally paid it off. The one thing they can't take off you, and you put youself in a position where they can. Not for me.
Click to expand...

There is no risk.
They can't take it off you.
You stay in your house till you die.
Then the house is sold, the debt is paid off and what's left gets shared between my brother and sister.
They also guarantee the money owing will never exceed the value of the house so there will never be any negative equity
 
Yeah but you know you're only going to blow it on fast women and loose cars......
Or is that the other way round..?:unsure:
Maybe not:p
 
bobmac said:
Ps
My house is about £150,000 I'm almost 60 and an online calculator has suggested I could draw £48,000.
Would there be any reason not to take the full amount bearing in mind the thread title?
Click to expand...

Hi Bob,

There is certainly a risk with taking less than the full amount, for someone in your position who doesn't necessarily care about retaining equity in the property.

Lets say a scenario whereby you take £20,000 with the intention of taking more in 5 years.

In 5 years time your debt has rolled up to around £24,000.
You are reliant on the property holding it's value (may seem obvious that property values will remain steady or continue to rise... but not guaranteed at all).
Also interest rates remaining low meaning that a company make the calculation that they can give you another chunk of equity and have a reasonable chance of the property always having enough value in it. (again, decent chance that rates will remain steady, but not guaranteed).

In reality, it's fairly likely that you will be able to take an even bigger chunk in 5 years time as your age will have worked for you (more than the current £48k total you are looking at)... but if property values and interest rates move against you (like in 2008 to 2013) it might not be quite the same story.

Also - likely you will have a new set of fees in 5 years time.

NB: I believe some products will do the calculation at the start and give you a facility for up to £48,000 in maybe 2 or 3 instalments. So you can take £20,000 now and up to another £28,000 in the years to come. Main benefit to you would be that you are rolling less interest up in the initial years.

Restriction with this is that if property values were up and interest rates were low, in the future it's likely you could take much more than £48,000 so by taking the risk of not taking all capital at once, then there's a chance you could have extracted more out of your property. But as it was, you are tied into the £48k loan and it may be costly to get out of that.

As another person stated - at age 60, the rest of your life is a long time and £48,000 may seem like a lot - but fast forward 10 years and you've worked your way through it at a fairly conservative pace of £5,000 per annum, your house needs repairs and your car is on it's last legs etc.

Sorry for the long post... but if you are still working and under 60, then I'd definitely leave things at the moment.
 
Last edited:
Thanks Grant.
I'm certainly interested in maybe taking installments rather than one big chunk.
But I think I'll wait a few years and then look again.
 
Is anyone else getting an agepartnership.co.uk equity release advert at the bottom of this post?

It's as if they know what we're talking about.
 
murphthemog said:
Seems madness to me to take risks with where you live, when you have finally paid it off. The one thing they can't take off you, and you put youself in a position where they can. Not for me.
Click to expand...

The company you have the loan with cannot take it off you all the time you are living there. It's in the contract.
 
Fair enough.

Another potential reason not to do this though. Care homes. We used equity from my FIL house to upgrade the care home he ended up in, so he had a decent one for his last 5 years. Not a nice thought, but from what I have seen, were I to end up in one, for what ever reason, I defo would not want to be in the ones the council use.
 
T
murphthemog said:
Fair enough.

Another potential reason not to do this though. Care homes. We used equity from my FIL house to upgrade the care home he ended up in, so he had a decent one for his last 5 years. Not a nice thought, but from what I have seen, were I to end up in one, for what ever reason, I defo would not want to be in the ones the council use.
Click to expand...

Thats the only fly in the ointment as I see it.
However, as interest rates are so low, there should always be enough equity left in the house to pay for it, assuming house prices keep up with inflation (not guaranteed I know).
 
Another angle to think about is the use of funds... what are you going to do with it and how long will it last? Is it worth it....in the context of interest element increasing the debt? Then what?

It might be... but that's the context of the conversation.... PXG clubs and Scotty rare headcovers!! Really? :-)

George Best was asked where his fortune went... he said "On dolly birds and champagne.... and I wasted the rest!" (or words to that effect!)
 
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