Equity Release options??

[DSLiverpool]

As I hit 54 this year and with no mortgage it's something I'm thinking about, we don't want to downsize.

[LeoSayer]

gizlaroc said:

The figures he was looking at was a lump release of £80,000, which over 20 years fixed at 3.4% apr meant we would owe them £111k.

£80,000 at 3.4% is £2,720 interest per year ie. over £50k before you start compounding. Where does £111k come from?

[gizlaroc]

LeoSayer said:

£80,000 at 3.4% is £2,720 interest per year ie. over £50k before you start compounding. Where does £111k come from?

Yeah, I was asking him this yesterday.
I said surely the £111k would be base on a repayment over 20 years. We got the paperwork out and it was £133,000 owed at 20 years. The £111k figure was showing what the total repaid would be on a 20 year repayment mortgage at the same rate. I suppose they were trying to point out at 3.4% apr the difference in paying it off each month vs paying it off when you sell your estate is not much?

[Sheepshanks]

Are you sure the 3.4% was fixed? There are variable rates around that on the net, but nothing like it for fixed.

Although I note you said it was APR - is there some unusual relationship between flat and APR rates on this kind of deal?

[gizlaroc]

Sheepshanks said:

Are you sure the 3.4% was fixed? There are variable rates around that on the net, but nothing like it for fixed.

Although I note you said it was APR - is there some unusual relationship between flat and APR rates on this kind of deal?

I guess if no capital is being paid off there is bugger all real difference between flat and APR?

Yeah it was fixed, however, I think he said it is fixed for 10 years years, then it will track the base rate. I need to look at the paperwork properly, but think we are off the idea....for now.

[Sheepshanks]

mike74 said:

I'm really struggling to understand the complexity of these Equity Release deals... Surely it should be as simple as we buy your house from you for, say, 60% of current market value but you get some kind of life time lease to carry on living there for the rest of your days.

That's basically what my in-laws did (Home Reversion). But you're not going to get 60% unless you're very old (if ever).

Snag is, as happened to them, what happens if circumstances change and you want to move or the house becomes unsuitable etc? And for the lender, it's great if you kick the bucket after a couple of years, but what happens if you live for 20 years, and the price of the property doesn't go up (or indeed, comes down)? It's a bit dicey for both parties.

There's a recent summary of the current schemes here: http://www.telegraph.co.uk/financial-services/reti...

[mike74]

Sheepshanks said:

That's basically what my in-laws did (Home Reversion). But you're not going to get 60% unless you're very old (if ever).

Snag is, as happened to them, what happens if circumstances change and you want to move or the house becomes unsuitable etc? And for the lender, it's great if you kick the bucket after a couple of years, but what happens if you live for 20 years, and the price of the property doesn't go up (or indeed, comes down)? It's a bit dicey for both parties.

There's a recent summary of the current schemes here: http://www.telegraph.co.uk/financial-services/reti...

Thanks for the reply, yeah I was only using 60% as an example, Home Reversion has obviously got it's drawbacks but I'm still surprised it isn't a bit more popular, there must be plenty of home owners out there who don't have any relatives to leave their property to.