Equity release
Discussion
Just working on retirement plans and looking for a general rough answer please.
I have no children, so for example if my home is valued at £1m and i'm 70 years old,what sort of money could I get from Equity release and how do any repayments work?
not looked into it, just working on retirement ideas/options.
I have no children, so for example if my home is valued at £1m and i'm 70 years old,what sort of money could I get from Equity release and how do any repayments work?
not looked into it, just working on retirement ideas/options.
Vincecj said:
That just takes you to a link to make an enquiry...With equity release you don't make any repayments unless you chose to - most don't because the products are designed for the interest to roll up into the debt. As I recall, the most you can borrow is relatively low, less than 1/3 the property value. The interest rates are generally quite high because the repayment date is unknown.
The other options are retirement mortgages which require you to make repayments in the same way as a normal mortgage. You can have interest only if required. The rates on these are better typically but you need income to be able to make the payments.
I assume you have explored downsizing. A £1m property value gives you quite a bit of scope for this.
The other options are retirement mortgages which require you to make repayments in the same way as a normal mortgage. You can have interest only if required. The rates on these are better typically but you need income to be able to make the payments.
I assume you have explored downsizing. A £1m property value gives you quite a bit of scope for this.
I got a few quotes 2 months ago, to pay for an extension.
I'm 65, house valued at £430k, no mortgage.
£12k pa company pension income, on-going self employment income of around £15k, and state pension of just under £10k due next year.
I tried 3 brokers, and direct with Nationwide.
Borrowing £100k would be tricky, £80k was no problem.
The interest rates offered varied from 2.9% to 3.9%. Fees ranged from zero (with Nationwide), to nearly £3k. Nationwide even offered to cover my legal fees, but needed builder's quotes and full planning/building regs approval before releasing funds.
Most of the offers were based on zero repayments, but with the option make repayments of up to 10% pa. Other options were "interest only", and even a standard 10 year repayment mortgage.
Interesting exercise, but I decided against it.
I'm 65, house valued at £430k, no mortgage.
£12k pa company pension income, on-going self employment income of around £15k, and state pension of just under £10k due next year.
I tried 3 brokers, and direct with Nationwide.
Borrowing £100k would be tricky, £80k was no problem.
The interest rates offered varied from 2.9% to 3.9%. Fees ranged from zero (with Nationwide), to nearly £3k. Nationwide even offered to cover my legal fees, but needed builder's quotes and full planning/building regs approval before releasing funds.
Most of the offers were based on zero repayments, but with the option make repayments of up to 10% pa. Other options were "interest only", and even a standard 10 year repayment mortgage.
Interesting exercise, but I decided against it.
Jasey_ said:
But as a rough guide on your numbers probably get £360k and you don't have to pay it back. They get the interest out of the remaining equity.
If the owner only gets 1/3 of the value, what happens to the other 2/3rds? Not all spent on interest surely? (and note the house will probably be worth more than £1M when eventually sold)Simpo Two said:
If the owner only gets 1/3 of the value, what happens to the other 2/3rds? Not all spent on interest surely? (and note the house will probably be worth more than £1M when eventually sold)
Possibly ...depends on interest rate of loan and life expectancy after loan taken out. 15 years at 5% interest is £760k ish ...20 years near a millionOf course there is some price appreciation in there on the property but not guaranteed....also lots of maintenance required over 20 period, what if the owner does not keep it in good repair.
1/3 value seems a safe bet for the lender
As has been said, if you are under 70, the most you are likely to be able to borrow is one third the value of the property. When I last looked the interest rate on this was around 4.76% before todays interest rate rise.
You don't actually pay any money back, the interest compounds on the original amount you borrow.
The thing about compound interest is it really ramps up the amount you owe very quickly. I did some simple math on this and borrowing 210K the amount you owe is as follows
15 Years = £428,244
20 Years = £543,062
33 years = £1,007,069
This is going to be the next PPI, expect a story in the Daily Mail with a lady pulling a sad compo face saying "Mum didn't know what she was signing (even though she blew all the money on a new Ford Fiesta and holidays to Granbia)" and "The finance company are trying to take mums house that she left me away, and we only buried her last week"
Don't do it unless you literally have nobody to leave the money too and want to live there until you die.
You don't actually pay any money back, the interest compounds on the original amount you borrow.
The thing about compound interest is it really ramps up the amount you owe very quickly. I did some simple math on this and borrowing 210K the amount you owe is as follows
15 Years = £428,244
20 Years = £543,062
33 years = £1,007,069
This is going to be the next PPI, expect a story in the Daily Mail with a lady pulling a sad compo face saying "Mum didn't know what she was signing (even though she blew all the money on a new Ford Fiesta and holidays to Granbia)" and "The finance company are trying to take mums house that she left me away, and we only buried her last week"
Don't do it unless you literally have nobody to leave the money too and want to live there until you die.
Joey Deacon said:
Don't do it unless you literally have nobody to leave the money too and want to live there until you die.
That's the likely outlook. But it's the throwing away of 66% of it I object to.Now if I could swing it the other way - invest in somebody else's house for 5% interest, that would be a different matter. But I'd need to be part of a group - like PTP lending I guess...a house-buying consortium... does such a thing exist?
Simpo Two said:
That's the likely outlook. But it's the throwing away of 66% of it I object to.
Now if I could swing it the other way - invest in somebody else's house for 5% interest, that would be a different matter. But I'd need to be part of a group - like PTP lending I guess...a house-buying consortium... does such a thing exist?
But if you have nobody to leave it to and die what are you actually throwing away? Plus you have, hopefully, enjoyed the money while you were alive?Now if I could swing it the other way - invest in somebody else's house for 5% interest, that would be a different matter. But I'd need to be part of a group - like PTP lending I guess...a house-buying consortium... does such a thing exist?
Joey Deacon said:
Don't do it unless you literally have nobody to leave the money too and want to live there until you die.
My father-in-Law did it some years ago and I think his deal was he got a quarter of the value of the house in return for giving up half the value.Then shortly after MIL took ill and died. They had a house with a largish and complicated (multi-terrace) garden and it had really been her thing to look after it.
He didn't want to stay in the house but after selling it and paying back the loan there wasn't enough to buy much else. Rest of the family had to wade in to help - without that he'd have been stuck in the house.
skeeterm5 said:
But if you have nobody to leave it to and die what are you actually throwing away? Plus you have, hopefully, enjoyed the money while you were alive?
2/3 of the value of my house to a finance house/bank. How do I enjoy that 2/3 while I'm alive?Seems to me that they're buying property at 33% of retail, they just have to wait a few years before they can sell.
I've seen the product offerings grow, rates getting more in line with std mortgages and they can almost be viewed as a self cert interest only re-mortgage IF you've CAREFULLY! considered the early redemption/portability details AND voluntarily pay/overpay the interest so the amount outstanding doesn't grow.
Might be handy for those 55+ with plenty of equity who's plan is to eventually downsize but want to retire early and aren't ready for that bungalow just yet.
Might be handy for those 55+ with plenty of equity who's plan is to eventually downsize but want to retire early and aren't ready for that bungalow just yet.
Simpo Two said:
2/3 of the value of my house to a finance house/bank. How do I enjoy that 2/3 while I'm alive?
Seems to me that they're buying property at 33% of retail, they just have to wait a few years before they can sell.
Aha - I thought you meant that when you die the value of the remaining property is seriously denuded. Seems to me that they're buying property at 33% of retail, they just have to wait a few years before they can sell.
Sheepshanks said:
My father-in-Law did it some years ago and I think his deal was he got a quarter of the value of the house in return for giving up half the value.
Then shortly after MIL took ill and died. They had a house with a largish and complicated (multi-terrace) garden and it had really been her thing to look after it.
He didn't want to stay in the house but after selling it and paying back the loan there wasn't enough to buy much else. Rest of the family had to wade in to help - without that he'd have been stuck in the house.
Future moving needs were one of my main concerns when my MiL took equity release. Then shortly after MIL took ill and died. They had a house with a largish and complicated (multi-terrace) garden and it had really been her thing to look after it.
He didn't want to stay in the house but after selling it and paying back the loan there wasn't enough to buy much else. Rest of the family had to wade in to help - without that he'd have been stuck in the house.
This is partly mitigated by the fact that the loan can be ported to a new property. I thought all allowed this.
LeoSayer said:
Future moving needs were one of my main concerns when my MiL took equity release.
This is partly mitigated by the fact that the loan can be ported to a new property. I thought all allowed this.
It was possible to port it but as he was downsizing it would have meant a hefty repayment (not much less than he'd got out of it in the first place) to keep the company's ownership at 50%. Also there was some urgency about the sale of the house he was buying and porting the equity release would have considerably delayed things.This is partly mitigated by the fact that the loan can be ported to a new property. I thought all allowed this.
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