Equity release

[Hells Granny]

Hi All,

Does anyone here have any experience with releasing equity from their homes?

For instance, good companies, ones to avoid,etc?

Cheers, HG

[magicwand]

Prudential offer a nice freindly service.

[Hells Granny]

Thank you, I'll go look at them.

Cheers, HG

[Papaumau]

Prudential offer a nice freindly service.

Prudential are not there to supply "nice friendly advice", they are there to make as much money as they can out of their clients !

I am in a postion to start to think about "equity release" as I own my home outright but after looking into these schemes I became of the opinion that they are VERY expensive.

There are two main types of equity release:

1). The lifetime mortgage...

Where a loan is taken out supported by the value of your home. There are no monthly re-payments of the principal sum borrowed or the interest accrued and when you die or go into a home the costs built up are laid against the cash made out of selling your home. This can often add up to a very large proportion of the value of the sale, meaning that very little might/could actually be left to your heirs when you do eventually die.

2). The home reversion plan....

Where all or part of your home is sold to the company - at very poor cash evaluation levels - and you are allowed to keep living in it until you need to go into a home or you die. At this point the company either owns all or part of your home and if only part of it was sold the rest will be sold and your heirs will get anything from thirty to sixty percent of the true market value from the sale.

After finding these facts out I decided against going for equity release !

[Wrinkles]

Well said PaPa, I too looked at a number of these schemes and the only winner is the equity company.
My answer, to which I am currently working is to raise an interest only mortgage against my main home, buy two or three maisonettes flats or small houses( Property is currently very cheap) and rent them out. The income from them would more than cover the mortgage repayments and provide a nice top  up for the bank account.
Obviously there are many pitfalls to be avoided but it can and does work. As and when you die your heirs still have the mortgage to pay off but by selling the other properties should see a handsome profit.

[Papaumau]

Nice idea Wrinkles and I hope that it goes well for you !

There still is a bit of a risk with property investments as the days of the steady rise in prices and values is now gone. Because of this many homeowners and buy-to-rent investors are still stuck with negative equity problems.

The best return for your money at the moment is precious metals, especially gold, but even that one will top out soon.

[John]

At least there is a much higher interest yield in letting property as against savings.

The letting market is still very buoyant. People can not afford to buy or their
employment or income is not stable enough to allow it.

Unless you have precious metals of age to sell, then the returns on
a speculative market are not guaranteed.

This is investment rather than income based.

[Papaumau]

As ordinary and unlicenced people are not allowed to buy or sell precious metals the only way that this can be done is by buying gold coin of the realm like Krugerrands etc'

If one has enough money to invest in this kind of gold trading then at the moment the percentage profits are very high for some. Sadly, the buying price for Krugerrands follows the selling price very closely.

For the moment trading in property is still VERY risky as steady growth in this area is not yet fully established during this recession.

Banks are STILL loath to lend  for property speculation reasons as they continue to sting from the bad investments of the sub-prime debachle.

[Wrinkles]

My son recently decided it was time to leave the nest and was intending to rent a house along with 3 friends. In the area he wanted to live a not very special 4 bedroom house would have cost them £300 per month each! excluding services.
£1200 per month for a basically furnished 4 bed house is more than a decent return for the landlord. Even allowing for a 40% cost for repairs and administration, which is an overly generous sum , it's still a good return. For the tenants it's dead money.

Needless to say common sense has prevailed and he is now in the process of buying a house where he will rent rooms to his friends. Their "rent will pay the mortgage and  his "rent" will serve to pay for maintenance.

[Papaumau]

The Buy-to-let-mob are taking advantage of the fact that mortgages are very hard to get these days and that is what is keeping their turnover going. AS usual they are taking advantage of the weak and ripping them off simply because they can.

This does not mean that in certain areas they are not stuck with these expensive lets lying empty in many cases.

[avalonmpk]

Beware if these schemes were fair and a good idea this 'government' would have found a more cunning way to separate pensioners from their hard earned gains. How many building Societies run schemes like this? Not many , if any at all.

[Papaumau]

Actually avalonmpk....I might have expected any caring government to introduce a state-sponsored scheme in order to help us release equity from our paid-up homes without the risk of being ripped off by privateer firms making a killing out of these VERY expensive schemes.

I have close to £200,000 tied up in my home but if I was to take part in any of these private schemes I would be at risk of losing a lot of the value of my home in order to swell their profits.

I want to have some of this cash so that my retirement is a bit more comfortable but I also want to leave something reasonable to my son and daughter too. With the equity-release schemes that are available at the moment I could not guarantee to have BOTH.