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Equity Release

Equity Release

Postby blingle » Sun Nov 04, 2018 11:42 am

There were a couple of posts on equity release in early 2017. Just wondered if anyone on the forums has taken out equity release on their UK properties more recently and if so what their experiences are. There are so many horror stories out there, and I know things are more "regulated" now, but do the benefits outweigh the potential pitfalls?
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Re: Equity Release

Postby TonTri » Sun Nov 04, 2018 12:48 pm

We took out equity release in July through Key Retirement. They were excellent all the way through the process. I didn't find it anything to be scared of, it's really just like having a mortgage only you don't have to make any payments if you don't want to. You choose the loan company depending on what your criteria are. We wanted to have a low interest rate with the option of paying all or part of it off over time so went with Legal and General in the end.

Our rate of interest is 3.99% fixed for life and we can pay either just the interest, or up to 10% of the loan amount, each year. After 15 years we can pay the full amount back without any early redemption fees. Alternatively, we don't need to make any payments and the accrued amount outstanding is deducted from the sale value of the house once we have both died. The amount outstanding can never exceed the sale value of the house so there is never negative equity.

One point to note is your UK property has to be your main residence and the lower the interest rate you choose the lower the amount you can borrow.
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Re: Equity Release

Postby blingle » Sun Nov 04, 2018 2:15 pm

What I'd be more worried about is any implications with regard to inheritance (ie. leaving something for my offspring), or possible financial difficulties in later life, say (for example) either my husband or I (or both) were to require nursing home or care in the future. Fortunately we're both in really good health at the moment for 60-odds, but that doesn't mean to say that things won't change for us.

Bit of a quandary really...we've worked all our lives to get to a stage where the mortgage is paid off, and I think we'd be reluctant to effectively be in debt to another company for the rest of our days in order to free up some cash!

I wonder whether the best option to release equity is just to downsize if it's possible?

Food for thought...
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Re: Equity Release

Postby jpeg » Sun Nov 04, 2018 4:02 pm

Much better to downsize if possible as you then will still own the house and can do what you want with it
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Re: Equity Release

Postby youbedizzy » Mon Nov 05, 2018 7:55 am

be alert to the effects of compound interest
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Re: Equity Release

Postby blingle » Mon Nov 05, 2018 8:01 am

And that's another thing...the rolled up interest really is horrendous.
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Re: Equity Release

Postby TonTri » Mon Nov 05, 2018 8:30 am

blingle wrote:And that's another thing...the rolled up interest really is horrendous.


I agree which is why we opted for a lower loan amount at a lower rate of interest which we can afford to pay off each year so we never owe more than the original amount.

As far as inheritance goes, you can protect a percentage of the value of your house for inheritance purposes, so if you wanted to keep 50% of the value as your inheritance you can stipulate that. It will obviously affect the sum you can be loaned.

It isn't something to go into lightly you need to make your own enquiries depending on your circumstances. Yes, downsizing is the best option if it's available, if not, equity release can be a viable proposition as long as you have worked all the sums out.
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Re: Equity Release

Postby jpeg » Mon Nov 05, 2018 8:42 am

Whoever you go with make sure they are members of The Equity Release Council (SHIP) if they are not you need to be sure you are dealing with a reputable company .

https://www.equityreleasecouncil.com/home/
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Re: Equity Release

Postby blingle » Mon Nov 05, 2018 1:09 pm

TonTri wrote:
As far as inheritance goes, you can protect a percentage of the value of your house for inheritance purposes, so if you wanted to keep 50% of the value as your inheritance you can stipulate that. It will obviously affect the sum you can be loaned.


That's really interesting. Do you know if they make some sort of charge for that option?
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Re: Equity Release

Postby TonTri » Mon Nov 05, 2018 2:17 pm

blingle wrote:
TonTri wrote:
As far as inheritance goes, you can protect a percentage of the value of your house for inheritance purposes, so if you wanted to keep 50% of the value as your inheritance you can stipulate that. It will obviously affect the sum you can be loaned.


That's really interesting. Do you know if they make some sort of charge for that option?


No charge, they just offer you a loan amount on the reduced value of the house. i.e. if your house is worth £200,000 and you would normally be eligible for an equity release loan of £50,000 but you want to preserve 50% for inheritance purposes, they would only loan you based on 50% of the house value £100,000, so £25,000.
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