Equity release.

Equity release.

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Do any accountants on this website have a view about the advantages or disadvantages of current equity release schemes which private individuals can use to raise money on their private property? Presumably, the capital 'locked away' in a property will either be left to someone when that person dies or if the person goes into care, the local authority will seize the property to fund that person's care - so wouldn't it make sense for an older property-owning person to draw cash out of his or her property and go on a wild (and hopefully) enjoyable spending spree while they're still about to do so? (How much is a brand new Porsche 911 these days anyway? Should I ask for a cash discount?)

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By WhichTyler
13th Jun 2011 15:28

Downsize/rent

The obvious disadvantages are: no money to pass on to family & friends and no money to pay for long term care.

 

The financial cost is primarily the fees & interest charged (higher than mortgage rate), substantial early repayment charge (if you win the pools) and the fact that interest compounds, so you may receive 1/3 the value of your house now, and accommodation (but remember you have to pay for maintenance etc), but that's your lot!

 

Why not sell the house (losing a percent to the estate agents) and use the cash to rent/cruise/buy a smaller place?

Incidentally, local authorites don;t usually 'seize' the house to pay for care. What they usually do is take a charge on it, and then allow you to run up a bill for care against it. Then when you don't need care any more and the day of reckoning is upon us, the bills are settled out of the estate. Now if the estate doesnt have enough cash to pay ithe debt, the house may have to be sold inthe end, but its not quite as graping as the Daily Mail makes out. If the children don't want the house sold, they can always pay the care bills themselves...

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By lawmaniz
20th Jun 2011 12:09

Equity release schemes.
Good reply, WhichTyler, and helpful too. I've got no friends or relatives! And I'm a member of Dignitas (of Switzerland - the express dispatch service!) It's just that having ended up buying and living in a large modern house in the New Forest, Hampshire, I feel as though I, rather than others such the government, ought to use the money tied up in the assets. There again, I don't want to be ripped off by the 'always-advertising' equality release companies. Maybe, like you say, sell up and then rent and spend the proceeds - usefully or recklessly!

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