Equity Release
Discussion
Hi folks,
I was talking with a friend the other day who is considering what to do about his home.
As he gets older, the home he lives in is no longer really suitable due to its location and so he's looking for alternatives.
As a rough guide, the home is worth about £200k.
To buy a house that would be ideal would be approx £250k.
He has no cash to spend and doesnt want a mortgage at his age (>70);
Is equity release a possible here? If not, any other cost effective ideas?
In my mind, the equity release firm would take a charge on the new, more expensive property, rather than the current one. the equity released would be used, along with the sale proceeds of the existing, to fund the new purchase.
Or something like that.
thanks in advance...
I was talking with a friend the other day who is considering what to do about his home.
As he gets older, the home he lives in is no longer really suitable due to its location and so he's looking for alternatives.
As a rough guide, the home is worth about £200k.
To buy a house that would be ideal would be approx £250k.
He has no cash to spend and doesnt want a mortgage at his age (>70);
Is equity release a possible here? If not, any other cost effective ideas?
In my mind, the equity release firm would take a charge on the new, more expensive property, rather than the current one. the equity released would be used, along with the sale proceeds of the existing, to fund the new purchase.
Or something like that.
thanks in advance...
I am missing something here ? if his property is only worth £200k and the new one is £250k that means £50k (plus costs) is needed to move in addition to the £200k equity in the exisiting property). If he does not have any cash and cannot/does not want to borrow then he only has £200k to spend - all of that equity is required to be put towards another property so where is there any equity to be released from ? does he have another property kicking about that is unencumbered ?
To me it sounds like he cannot afford to move.
To me it sounds like he cannot afford to move.
Sorry folks if Im explaining poorly. I know sfa about equity release (clearly!).
The idea is that right now, he has £200k.
The "equity release" firm lend him £50k (to keep the numbers simple) to help fund the new place.
They would then own, for example 40% of the value of the new place (say £100k for easy maths). So their "margin" is £50k.
Does that make any sense?
The idea is that right now, he has £200k.
The "equity release" firm lend him £50k (to keep the numbers simple) to help fund the new place.
They would then own, for example 40% of the value of the new place (say £100k for easy maths). So their "margin" is £50k.
Does that make any sense?
StangGT said:
Sorry folks if Im explaining poorly. I know sfa about equity release (clearly!).
The idea is that right now, he has £200k.
The "equity release" firm lend him £50k (to keep the numbers simple) to help fund the new place.
They would then own, for example 40% of the value of the new place (say £100k for easy maths). So their "margin" is £50k.
Does that make any sense?
No. The idea is that right now, he has £200k.
The "equity release" firm lend him £50k (to keep the numbers simple) to help fund the new place.
They would then own, for example 40% of the value of the new place (say £100k for easy maths). So their "margin" is £50k.
Does that make any sense?
StangGT said:
Sorry folks if Im explaining poorly. I know sfa about equity release (clearly!).
The idea is that right now, he has £200k.
The "equity release" firm lend him £50k (to keep the numbers simple) to help fund the new place.
They would then own, for example 40% of the value of the new place (say £100k for easy maths). So their "margin" is £50k.
Does that make any sense?
No. The idea is that right now, he has £200k.
The "equity release" firm lend him £50k (to keep the numbers simple) to help fund the new place.
They would then own, for example 40% of the value of the new place (say £100k for easy maths). So their "margin" is £50k.
Does that make any sense?
The issue is once he sells £200k house he has to pay back the equity release so he will still have £200k less selling fees.
Generally older people DOWNGRADE in house price so release equity that way and then you could amplify it by going for equity release on the new cheaper place too.
StangGT said:
Sorry folks if Im explaining poorly. I know sfa about equity release (clearly!).
The idea is that right now, he has £200k.
The "equity release" firm lend him £50k (to keep the numbers simple) to help fund the new place.
They would then own, for example 40% of the value of the new place (say £100k for easy maths). So their "margin" is £50k.
Does that make any sense?
I understand. I think.The idea is that right now, he has £200k.
The "equity release" firm lend him £50k (to keep the numbers simple) to help fund the new place.
They would then own, for example 40% of the value of the new place (say £100k for easy maths). So their "margin" is £50k.
Does that make any sense?
You're asking if, essentially, he can get a mortgage for the £50k he needs but rather than it be a standard mortgage with repayments, it could be an Equity Release type product where the lender takes a stake in the property rather than monthly repayments in the normal way?
Sarnie said:
I understand. I think.
You're asking if, essentially, he can get a mortgage for the £50k he needs but rather than it be a standard mortgage with repayments, it could be an Equity Release type product where the lender takes a stake in the property rather than monthly repayments in the normal way?
BingoYou're asking if, essentially, he can get a mortgage for the £50k he needs but rather than it be a standard mortgage with repayments, it could be an Equity Release type product where the lender takes a stake in the property rather than monthly repayments in the normal way?
rockin said:
It's not difficult.
Sell the £200k house, invest the £200k and rent a more suitable property....
I actually suggested that but where he lives, rents are relatively high compared to house prices, so the investment returns would need to be pretty damn good and consistent. Couple that with a very risk averse nature and it ended up as a non starter.Sell the £200k house, invest the £200k and rent a more suitable property....
Thanks for all the input though chaps
StangGT said:
Sorry folks if Im explaining poorly. I know sfa about equity release (clearly!).
The idea is that right now, he has £200k.
The "equity release" firm lend him £50k (to keep the numbers simple) to help fund the new place.
They would then own, for example 40% of the value of the new place (say £100k for easy maths). So their "margin" is £50k.
Does that make any sense?
NoThe idea is that right now, he has £200k.
The "equity release" firm lend him £50k (to keep the numbers simple) to help fund the new place.
They would then own, for example 40% of the value of the new place (say £100k for easy maths). So their "margin" is £50k.
Does that make any sense?
Makes perfect sense to me. He'd be buying the new property with immediate equity release of enough equity to at least cover the additional cost.
I've no idea whether such a scheme is possible, but don't see why not.
ETA: Scenario 1 here: http://www.equityreleasesupermarket.co.uk/news/tag...
I've no idea whether such a scheme is possible, but don't see why not.
ETA: Scenario 1 here: http://www.equityreleasesupermarket.co.uk/news/tag...
Edited by Sheepshanks on Friday 4th August 21:30
This is completely feasible and easily doable.
Equity release can be used for both purchasing or remortgaging so a £250k house owned or to be purchased by a 70 year old could raise up to say £90k easily.
Think of his £200k sales proceeds as a deposit with £50k needed to complete the purchase via an ER mortgage. Provider lends £50k, takes first charge on property, interest accrues and compounds over time until he dies or goes into residential care whereupon house is sold, debt repaid & surplus is the borrower's of his beneficiaries.
Equity release can be used for both purchasing or remortgaging so a £250k house owned or to be purchased by a 70 year old could raise up to say £90k easily.
Think of his £200k sales proceeds as a deposit with £50k needed to complete the purchase via an ER mortgage. Provider lends £50k, takes first charge on property, interest accrues and compounds over time until he dies or goes into residential care whereupon house is sold, debt repaid & surplus is the borrower's of his beneficiaries.
Edited by cranford10 on Friday 4th August 21:57
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