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[Finance] Equity release



Peacehaven Wild Kids

Peacehaven Wild Kids

Well-known member
Jan 16, 2022
2,342
The Avenue then Maloncho
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
 








Dick Swiveller

Dick Swiveller

Well-known member
Sep 9, 2011
9,165
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

southstandandy

WEST STAND ANDY
Jul 9, 2003
5,663
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

BNthree

Plastic JCL
Sep 14, 2016
10,966
WeHo
Only do it if you’re desperate for the cash. Even then just sell the property and move in somewhere instead.
 




drew

drew

Drew
Oct 3, 2006
23,073
Burgess Hill
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.
 








phoenix

phoenix

Well-known member
May 18, 2009
2,605
deleted
 
Last edited:






jessiejames

jessiejames

Never late in a V8
Jan 20, 2009
2,705
Brighton, United Kingdom
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.
 








A

A mex eyecan

Well-known member
Nov 3, 2011
3,328
jessiejames said:
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.
Click to expand...

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.
 




Icy Gull

Icy Gull

Back on the rollercoaster
Jul 5, 2003
72,015
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

B-right-on

Living the dream
Apr 23, 2015
6,197
Shoreham Beaaaach
Tom Hark said:
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
Click to expand...

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

Cheshire Cat

The most curious thing..
Nov 4, 2006
11,456
Sitting on a bough of a tree a few yards off...
Dick Swiveller said:
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.
Click to expand...
Be aware of the tax implications. You might find you are paying 40% tax on it if it is classed as income in year.
 


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