Releasing equity in home
Discussion
Ok, don’t worry will be talking with the professionals before we do anything but thought I’d see if anyone here is in a similar situation….
Mrs T & I are in our mid 50s, reasonable pension pots and savings/investments and own our own home…
We’re now both sick of our jobs and contemplating retiring/doing less stressful more rewarding work. Possibly part time with low or even no pay.
We’ve no children and our nieces and nephews are already going to be well looked after by their respective families so anything they’d inherit from us would be a bonus
So, we’d like to get as close to leaving nothing left as we can… we’ve ideally no plans to move but are starting to think what’s the best way to release any equity in our house and really enjoy it as part of our retirement pot (at the right time and it may not come to it). Having seen our parents not really enjoy what they!earned after years of hard work we’re keen to avoid that..
Anyone done/doing something similar??
Mrs T & I are in our mid 50s, reasonable pension pots and savings/investments and own our own home…
We’re now both sick of our jobs and contemplating retiring/doing less stressful more rewarding work. Possibly part time with low or even no pay.
We’ve no children and our nieces and nephews are already going to be well looked after by their respective families so anything they’d inherit from us would be a bonus
So, we’d like to get as close to leaving nothing left as we can… we’ve ideally no plans to move but are starting to think what’s the best way to release any equity in our house and really enjoy it as part of our retirement pot (at the right time and it may not come to it). Having seen our parents not really enjoy what they!earned after years of hard work we’re keen to avoid that..
Anyone done/doing something similar??
Not in the same position at all but my knee jerk thought is that if you have those Pensions and other incoming available then releasing equity “ early “ seems a little pointless ?
Providing your other incoming can provide an alternative source of income to cover all existing outgoings then giving up your jobs tomorrow if that’s what you want seems a fabulous idea though !
Should you then discover your budget was wrong you then have the house equity plan as back up.
If you were talking about buying a second property abroad or something similar as soon as you retire then my knee jerk thought to that would be to do it though.
I’ve never been keen on the concept of equity release but then I’ve got children so it’s a a very different scenario.
Best of luck in your decision making.
Providing your other incoming can provide an alternative source of income to cover all existing outgoings then giving up your jobs tomorrow if that’s what you want seems a fabulous idea though !
Should you then discover your budget was wrong you then have the house equity plan as back up.
If you were talking about buying a second property abroad or something similar as soon as you retire then my knee jerk thought to that would be to do it though.
I’ve never been keen on the concept of equity release but then I’ve got children so it’s a a very different scenario.
Best of luck in your decision making.
I suppose it depends on what your ambition in regards to retirement is. What does retirement look like, what do you want to do and what’s that going to cost.
If it were me and there was no kids to tie me to the U.K. I’d be selling up and living somewhere nice and warm.
If you don’t want to do that then I guess you just downsize when you need to. I’m all for early retirement and then spend as much of your money in the 1st 10-15yrs though before your too old.
Whatever you want to do just do it.
If it were me and there was no kids to tie me to the U.K. I’d be selling up and living somewhere nice and warm.
If you don’t want to do that then I guess you just downsize when you need to. I’m all for early retirement and then spend as much of your money in the 1st 10-15yrs though before your too old.
Whatever you want to do just do it.
alscar said:
Not in the same position at all but my knee jerk thought is that if you have those Pensions and other incoming available then releasing equity “ early “ seems a little pointless ?
Providing your other incoming can provide an alternative source of income to cover all existing outgoings then giving up your jobs tomorrow if that’s what you want seems a fabulous idea though !
Should you then discover your budget was wrong you then have the house equity plan as back up.
If you were talking about buying a second property abroad or something similar as soon as you retire then my knee jerk thought to that would be to do it though.
I’ve never been keen on the concept of equity release but then I’ve got children so it’s a a very different scenario.
Best of luck in your decision making.
Thanks; should have been clearer; plan wouldn’t be to release the equity right now but to have it as part of our plan so at the right point it time it’s what we do… and hey, we might move/downsize… who knows, plus state pension and a small guaranteed pension from when 67 onwards will be a nice top up tooProviding your other incoming can provide an alternative source of income to cover all existing outgoings then giving up your jobs tomorrow if that’s what you want seems a fabulous idea though !
Should you then discover your budget was wrong you then have the house equity plan as back up.
If you were talking about buying a second property abroad or something similar as soon as you retire then my knee jerk thought to that would be to do it though.
I’ve never been keen on the concept of equity release but then I’ve got children so it’s a a very different scenario.
Best of luck in your decision making.
Muzzer79 said:
I would downsize rather than give up equity.
Or, with no work ties restricting me, I would move to somewhere cheaper with a better climate.
This makes more sense. Sure release some early for a holiday or something but you still need to pay it back you will have a mortgage over an ever decreasing timeframe sell up and release some decent money without the bank having to agree terms. Or, with no work ties restricting me, I would move to somewhere cheaper with a better climate.
My "plan", if you could call it that, is to spend my entire pension pot between ages 55 and 75 - I'm already 60. Then at 75 we will downsize to a smaller property, possibly an apartment, and then use the difference (hopefully around £500K in today's money) to top up the state pension.
That assumes that we will continue the lifestyle of the past 5 years for another 15, by which time we'll want to slow down considerably. Obviously it won't be an instant change, but sometime between 70 and 80 I see us wanting a slower pace of life.
If you want to release equity, then by all means look into it. Interest rates are quite a lot higher than for a mortgage and the amount you can release is a relatively small % of the value - 25% or so. You may be able to get more if you're a lot older (e.g. 70) when you take it out, but I'm not sure about that. The other problem with Equity Release is that it makes downsizing pretty challenging as they will want to maintain the % value of the original loan.
That assumes that we will continue the lifestyle of the past 5 years for another 15, by which time we'll want to slow down considerably. Obviously it won't be an instant change, but sometime between 70 and 80 I see us wanting a slower pace of life.
If you want to release equity, then by all means look into it. Interest rates are quite a lot higher than for a mortgage and the amount you can release is a relatively small % of the value - 25% or so. You may be able to get more if you're a lot older (e.g. 70) when you take it out, but I'm not sure about that. The other problem with Equity Release is that it makes downsizing pretty challenging as they will want to maintain the % value of the original loan.
I think you need to ask yourself, "can we manage in our current house when we are 80?" If it's a no, then I suggest you move into something more adaptable but, not at the age you are now. Wait another 10 years or so.
Moving house is quite stressful these days. It's much worse if you have to move because of illness. My advice would be, move before you have to.
Moving house is quite stressful these days. It's much worse if you have to move because of illness. My advice would be, move before you have to.
Most (not all) Equity release firms are sharks, read the small print twice, and then another ten times then fifteen times after that.
Better (imo) to downsize nearer the time, assuming you are downsizing to a house suitable for your requirements.
I'm quite a bit older than you
, in good health and plan to downsize from our large six bedroomed house with large lawns to a small 3/4 bedroom bungalow within 2/3 years, freeing up a decent amount of cash,
We could go down the ER route, but I would not touch them with a bargepole.
Of course if you WANT to stay in your house and don't have children it COULD be a good option, but still read the small print.
Better (imo) to downsize nearer the time, assuming you are downsizing to a house suitable for your requirements.
I'm quite a bit older than you
, in good health and plan to downsize from our large six bedroomed house with large lawns to a small 3/4 bedroom bungalow within 2/3 years, freeing up a decent amount of cash,We could go down the ER route, but I would not touch them with a bargepole.
Of course if you WANT to stay in your house and don't have children it COULD be a good option, but still read the small print.
I can definitely recommend retiring early.
Equity release has a bad name, but personally, I regard the equity in our house as part of the pension fund.
So if other funds run out, then I'll be happy to sell the house and live off the proceeds.
I was recently told that quite a lot of people have some sort of mortgage or other debt on their house well beyond state retirement age.
Who knows what ER products will be on the market in 10 or 15 years' time?
Equity release has a bad name, but personally, I regard the equity in our house as part of the pension fund.
So if other funds run out, then I'll be happy to sell the house and live off the proceeds.
I was recently told that quite a lot of people have some sort of mortgage or other debt on their house well beyond state retirement age.
Who knows what ER products will be on the market in 10 or 15 years' time?
I’ve been wondering about this too. I live alone, 62 no living relatives, no kids, just me. Equity release looks like a con.
I’ve come up with my own idea, via a solicitor to make it all legal etc I sell my house to someone at todays full market value, they get the house when I die etc. Here’s the Pistonheads bit, I then use some of that cash to buy a BAC mono and when I die the person that bought my house gets that too!
Form an orderly queue please…I’m sure there will be someone along shortly to pick holes in this.
I’ve come up with my own idea, via a solicitor to make it all legal etc I sell my house to someone at todays full market value, they get the house when I die etc. Here’s the Pistonheads bit, I then use some of that cash to buy a BAC mono and when I die the person that bought my house gets that too!
Form an orderly queue please…I’m sure there will be someone along shortly to pick holes in this.
Don't even contemplate equity release until you are sure that your savings can't meet your retirement spending needs. Do you have a cashflow plan or similar to indicate that equity release is necessary for you?
My experience (through a relative who used one) is that equity release firms aren't sharks.
My experience (through a relative who used one) is that equity release firms aren't sharks.
Edited by LeoSayer on Friday 1st November 21:55
Ex Mother in law died recently so my kids will inherit part of her estate. It came to light that she took equity release in 2011 for the sum of £35k. So 13 years of interest has the amount outstanding of £87k and still accruing until the house is sold. Shocking really and obviously rates will be far worse now. I know you're not fussed about leaving anything but amazing how quickly it would all disappear with a bigger sum.
cadmunkey said:
Ex Mother in law died recently so my kids will inherit part of her estate. It came to light that she took equity release in 2011 for the sum of £35k. So 13 years of interest has the amount outstanding of £87k...
That's a very good investment - for the equity release company. Makes me wonder if they're investable...With respect to the fellow 'headers here, there is a bit of unbalanced opinion being espoused IMHO....
Equity release is just a tool amongst many in the toolbox.
If you want to raise money, it's one of the cheapests way to do it.
Prior to 2022, Equity release interest rates were about 2% higher than std interest rates to reflect lenders not getting money for 10, 15, 30 years. That meant a lowish 2.5-3%. Very cheap tbh.....(compounding knowledge notwithstanding)
Post 2022 budget fiasco, ALL interest rates went up and rates for Equity Relaese at that 1.5-2% premium so could be 6-7, even 7.5%
The thing people forget is it's not so much the interest rate - although that really matters, that means to quantum owed being high, as it is the duration of loan all courtesy of the 8th wonder of the world (COMPOUND INTEREST) that ramps up amount owed/or earnt - as in fact it the does to your house value.
Just look at this figures for 100,000 using say 7% over 20 years (earnt/owed) its the same whether you are paying back a lender or enjoying house growth inflation : See how compound interest gets on its way as an investor/lender towards end of the 20 yr cycle - with end intererest being nearly 4 times early years.
And again, you cant denigrate this as if your an investor it works in your favour, as it does to your detriment as a borrower :
Year Interest Accrued
Interest Balance
FIRST COLUMN INTEREST, AND SECOND COLUMN CUMULATIVE INTEREST OWED, 3RD CUM TOTAL OWED
0 – – £100,000.00
1 £7,229.01 £7,229.01 £107,229.01
2 £7,751.59 £14,980.60 £114,980.60
3 £8,311.96 £23,292.56 £123,292.56
4 £8,912.83 £32,205.39 £132,205.39
5 £9,557.14 £41,762.53 £141,762.53
6 £10,248.02 £52,010.55 £152,010.55
7 £10,988.85 £62,999.41 £162,999.41
8 £11,783.24 £74,782.65 £174,782.65
9 £12,635.05 £87,417.70 £187,417.70
10 £13,548.44 £100,966.14 £200,966.14
11 £14,527.86 £115,494.00 £215,494.00
12 £15,578.08 £131,072.07 £231,072.07
13 £16,704.22 £147,776.29 £247,776.29
14 £17,911.77 £165,688.06 £265,688.06
15 £19,206.61 £184,894.67 £284,894.67
16 £20,595.06 £205,489.73 £305,489.73
17 £22,083.88 £227,573.61 £327,573.61
18 £23,680.32 £251,253.93 £351,253.93
19 £25,392.18 £276,646.11 £376,646.11
20 £27,227.78 £303,873.88 £403,873.88
Also, in the final analysis - there is another factor to establish too. the variance between house price inflation and youR locked in Equity release INTEREST RATE ie if your equity relaese is say 6% and house price inflation is also 6% the net present value in 20 years is equal = no loss to estate from the VALUE 20 years prior - ZOMBIE investment so to speak, but not a massive trouser removal loss as suggested.
As a counterpoint £100,000 'borrowed' on a credit card for 20 years at typical 19.8-24% apr would be £1,0000,000 plus payback capital plus interest !!!!
Regards
PT - MBA
Equity release is just a tool amongst many in the toolbox.
If you want to raise money, it's one of the cheapests way to do it.
Prior to 2022, Equity release interest rates were about 2% higher than std interest rates to reflect lenders not getting money for 10, 15, 30 years. That meant a lowish 2.5-3%. Very cheap tbh.....(compounding knowledge notwithstanding)
Post 2022 budget fiasco, ALL interest rates went up and rates for Equity Relaese at that 1.5-2% premium so could be 6-7, even 7.5%
The thing people forget is it's not so much the interest rate - although that really matters, that means to quantum owed being high, as it is the duration of loan all courtesy of the 8th wonder of the world (COMPOUND INTEREST) that ramps up amount owed/or earnt - as in fact it the does to your house value.
Just look at this figures for 100,000 using say 7% over 20 years (earnt/owed) its the same whether you are paying back a lender or enjoying house growth inflation : See how compound interest gets on its way as an investor/lender towards end of the 20 yr cycle - with end intererest being nearly 4 times early years.
And again, you cant denigrate this as if your an investor it works in your favour, as it does to your detriment as a borrower :
Year Interest Accrued
Interest Balance
FIRST COLUMN INTEREST, AND SECOND COLUMN CUMULATIVE INTEREST OWED, 3RD CUM TOTAL OWED
0 – – £100,000.00
1 £7,229.01 £7,229.01 £107,229.01
2 £7,751.59 £14,980.60 £114,980.60
3 £8,311.96 £23,292.56 £123,292.56
4 £8,912.83 £32,205.39 £132,205.39
5 £9,557.14 £41,762.53 £141,762.53
6 £10,248.02 £52,010.55 £152,010.55
7 £10,988.85 £62,999.41 £162,999.41
8 £11,783.24 £74,782.65 £174,782.65
9 £12,635.05 £87,417.70 £187,417.70
10 £13,548.44 £100,966.14 £200,966.14
11 £14,527.86 £115,494.00 £215,494.00
12 £15,578.08 £131,072.07 £231,072.07
13 £16,704.22 £147,776.29 £247,776.29
14 £17,911.77 £165,688.06 £265,688.06
15 £19,206.61 £184,894.67 £284,894.67
16 £20,595.06 £205,489.73 £305,489.73
17 £22,083.88 £227,573.61 £327,573.61
18 £23,680.32 £251,253.93 £351,253.93
19 £25,392.18 £276,646.11 £376,646.11
20 £27,227.78 £303,873.88 £403,873.88
Also, in the final analysis - there is another factor to establish too. the variance between house price inflation and youR locked in Equity release INTEREST RATE ie if your equity relaese is say 6% and house price inflation is also 6% the net present value in 20 years is equal = no loss to estate from the VALUE 20 years prior - ZOMBIE investment so to speak, but not a massive trouser removal loss as suggested.
As a counterpoint £100,000 'borrowed' on a credit card for 20 years at typical 19.8-24% apr would be £1,0000,000 plus payback capital plus interest !!!!
Regards
PT - MBA
Edited by Paul Thorpe evo on Friday 1st November 20:53
omniflow said:
My "plan", if you could call it that, is to spend my entire pension pot between ages 55 and 75 - I'm already 60. Then at 75 we will downsize to a smaller property, possibly an apartment, and then use the difference (hopefully around £500K in today's money) to top up the state pension.
.
Almost exactly what I’m doing with Mrs A. I’m 61 and we want to do another self-build (did one in 2013) in a few years. We’re going to use savings and pension money already released to buy a plot in the next 12-24 months (once we fid one) and then sit on it until the time is right to see our current place and bank the excess..
I can’t understand anyone in their 50s being prepared to accept the property they’re in now as being the last one they will live in. I know we’re all different but that just seems too early in life to make that decision.
Edited by Arrivalist on Friday 1st November 21:29
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