Equity

Would you ever consider raising equity on your property, what are the pitfalls.

Re: Equity

Hi Bill I have listened to a number of discussions on Equity Release Schemes on the Money Programme Radio 4

I think you need to be a certain age before the schemes are worth considering. Also it seems the companies already out there don't offer a very good deal.


The problem for me is by the time I am old enough to consider ER I will be past being up to doing much with the cash

Re: Equity

My neighbour looked into it and, to me, it looked a poor deal.

Re: Equity

I'd say if you were between 50-60, had no close Family you wanted to leave your house to and you got the best deal out there it would be OK to get a large amount of cash to do what you like with while you still can Bill. I think I would feel a bit uncomfortable though, sort of like having the bailiff looming over one shoulder and the devil over the other. .
The wife and me have enough to live out the rest of our days in moderate comfort so it wouldn't interest us. Our house is left to our two children equally, they can sell it, rent it, live in it, or split it with a bulldozer if they like.

Re: Equity

Raising money whilst ostensibly re-mortgaging your home might sound and look attractive whilst bank interest rates are low, what happens if the bank rate rises??? - can you still afford to meet the payments??? - there are all sorts of pitfalls to this I would counsel against it.

Re: Equity

Uncle Joe, I don't think that equity release involves any repayments as such. I believe that a finance company will advance you a percentage of your home's value and you can continue to live in it. When you pass on, the house is sold and the proceeds pay off the advance + interest.

Except in a limited number of cases, I don't think it's a good deal.

Re: Equity

As someone else has said, it depends on your age now and whether releasing money this way is right for you Bill.

It's something we had considered some time ago but the thing that stopped us is the fact that, since we paid off our mortgage three years ago, our outgoings are just to run the house and feed & clothe ourselves.

We've also been on holiday three times in those three years and we are by no means rich.

It took us years of scrimping and saving to make additional payments towards our house to reduce the mortgage to a figure where our under-performing endowment would pay it all off so we thought why go through it all again when we have no real knowledge of what bank rates could rise to, (as Joe says), nor any possible life-changing things that could happen impacting on our income?

Considering that I was made redundant 4 times since we first moved into this house, (and my wife was made redundant once too!), we thought our best option was to reduce debts so that we knew what our outgoings would be as we already knew what our income was going to be.

We get by now on pension income and my part-time employment and it's not a lot but we would've been in serious trouble if we hadn't paid off the house.

Friends of ours did something like this and I don't know what kind of company they went with but they paid a rent to stay and eventually that rent got to the point where they could not afford it with one partner fully retired and the other semi-retired.

We counselled them against going ahead until they got some more info but they went ahead anyway!

They were however extremely lucky because the Council answered their desperate plea and they got a council property to live in but in reality they put themselves in the position where they would have been homeless.

I know that with Equity Release Schemes this kind of thing is not the norm but they fell into the trap thinking the meagre initial rent would remain low but it did not!

You sound as if you want reassurance Bill and as others have already said, it's really up to the individual but I'd be very, very wary myself and I'd seriously consider all possibilities and how I'd manage with a number of different eventualities first then decide. stevmk2

Re: Equity

Thank you all for your replies, i fortunately am not in an immediate need of cash nor likely to be, i have no experience of Equity release, at the moment i am bombarded with e-mails from equity companies, i was just curious. all your advice is well recieved.

Re: Equity

There are basically two types of Equity release schemes
'Home Revision' and 'Lifetime Mortgage' explained here in a 'Which' review..
http://www.which.co.uk/money/retirem...lease-schemes/

I looked into it a few years ago and didn't like what I discovered.
Although a bit of cash would be very useful to supplement my meagre savings, I would never do anything to risk the feeling of security I get from owning my own home .