Equity Release to buy a boat

[LONG_KEELER]

Anyone done it

I was thinking after a friend said to me " at your age a pound not spent is a pound wasted "

Is it ok for pensioners to do this sort of thing ?

What will the children think ?

 

[Bru]

Never mind pensioners, we sold up the house and used the equity to buy the boat that will be the boat of our dreams (when I've finished refurbishing it) and to fund the deposit for No.1 Son to buy a house. Then we moved in with him

So now we not only have the boat we want, we get to forget to pay the board and lodging to No.1 Son from time to time which is only just 'cos he used to do the same to us

You can't take it with you

 

[davidej]

Downsizing yes - did it myself

But the types of equity release advertised in the weekend newspapers to buy a lifestyle depreciating asset - no never

 

[lw395]

I knew somebody who'd re-mortgaged his house, rented it out and bought a motorhome.
It worked for them.
Everybody's finances are different.
Some of the more interesting people have quite 'different' finances.

The capital cost of buying a boat is often not the problem.

 

[Robert Wilson]

I knew somebody who'd re-mortgaged his house, rented it out and bought a motorhome.
It worked for them.
Everybody's finances are different.
Some of the more interesting people have quite 'different' finances.

The capital cost of buying a boat is often not the problem.

Absolutely!
When I bought Khamsin my son was horrified. He almost screamed "Can you afford it?"
I replied that I'd cashed in some life insurances, explaining that he was now old enough to not need "Daddy's financial help when Daddy's dead".

To which he responded, "I meant the maintenance costs, not the purchase."

I wish I'd listened to him............................

So Equity Release may well fund the boat, but you'll need a fair income to maintain it (or a tidy lump sum not needed for anything else)

I hope I'm not preaching to the converted?

 

[pvb]

Is it ok for pensioners to do this sort of thing ?

Yes.

What will the children think ?

If you tell them, hopefully they'll be happy that you're using your assets to enhance your life. If you don't tell them, they'll find out eventually and again hopefully be pleased for you.

There's no reason why children should expect to inherit a large sum; indeed many would prefer their parents to spend the money on themselves.

 

[Seajet]

A good friend of mine told his parents the only thing he wanted to hear after their funeral was ' Being of sound mind, we've spent all the money ' If there's a boat you dream of, now is a good time to grab her.

 

[KellysEye]

Have a look at this http://www.thisismoney.co.uk/money/...uity-release-debt-home-double-years-time.html I wouldn't touch one.

 

[pvb]

Have a look at this http://www.thisismoney.co.uk/money/...uity-release-debt-home-double-years-time.html I wouldn't touch one.

That's your choice, but many people see equity release as a way of releasing funds from their home whilst continuing to be able to live in it. There are lots of people who haven't saved enough for their retirement.

 

[bedouin]

Whatever the question Equity release is never the answer. (Well almost never).

To use equity release to buy an asset that is itself expensive to run is a non starter. Downsize or take out a mortgage - if you can't afford to do either you can't afford the boat.

 

[steveej]

what exactly do you mean by equity release. Refinancing the mortgage on your home to release capital to buy a boat is quite a different thing to the link above. And in my mind, is a perfectly sensible way of financing a boat cheaply provided you are in your thirties and have at least another 20 years of work left in you.

 

[bedouin]

what exactly do you mean by equity release. Refinancing the mortgage on your home to release capital to buy a boat is quite a different thing to the link above. And in my mind, is a perfectly sensible way of financing a boat cheaply provided you are in your thirties and have at least another 20 years of work left in you.

Equity Release is a scheme where you borrow capital against the value of your house but don't make any repayments, instead the company takes a large proportion of the value of your house when you die. It is in effect a lifetime mortgage but the rates are very high compared with a normal mortgage.

A conventional remortgage or downsizing can both be good options - but if you can't afford to remortgage to raise the capital you can't afford to run the boat. Mortgage rates are 2-3%, boat running costs more like 10-20%

 

[lw395]

Equity Release is a scheme where you borrow capital against the value of your house but don't make any repayments, instead the company takes a large proportion of the value of your house when you die. It is in effect a lifetime mortgage but the rates are very high compared with a normal mortgage.

A conventional remortgage or downsizing can both be good options - but if you can't afford to remortgage to raise the capital you can't afford to run the boat. Mortgage rates are 2-3%, boat running costs more like 10-20%

Yes, 'equity release' is full of high rates and slimy salesmen.
But downsizing can be equally fraught. The costs in buying and selling are not small either. Plus some people want to carry on living where they are.

 

[RichardS]

Whatever the question Equity release is never the answer. (Well almost never).

My parents, both dead now, asked me about equity release as a way of generating funds to enjoy their retirement and improve our childhood home, although not to buy a boat.

As Bedouin says, I suggested a much better way. We get the house valued and then we three Sons all purchase a percentage of the house depending upon how much we can afford. A solictor draws up the 4-way agreement that when both parents die the net proceeds of the sale of the house are shared out in the same percentages. The percentages could be equal, like 3 x 5%, or unequal depending upon how much is needed. The agreement is worded such that the risk is all ours ........ but whoever lost money over the long term on property?

Part of the money was also used to improve the house so that also increased the value our investment. If the money was used to buy a boat that might pass to the children eventually, if not sold, so some of the money gets "re-cycled" in a similar way.

Total cost of arrangement ...... £200!

Richard

 

[johnalison]

I think that it depends on the numbers involved. I intend to release some of the equity in my £20 million mansion and buy a superyacht for £2 million, or at least, I would if I could and it would not affect my prospects. If I buy a £100,000 yacht with the value of my £150,000 house I will probably soon be throwing myself on the mercy of the state. We downsized and moved outside the M25 and our boat is worth less than 20% of our house, so although it has cost us money in the last 17 years, the value it has given us has been priceless.

 

[lw395]

That's your choice, but many people see equity release as a way of releasing funds from their home whilst continuing to be able to live in it. There are lots of people who haven't saved enough for their retirement.

I think I've saved up enough for my retirement, but some of those savings are tied up in our house.
The capital in my house is no different from the capital in my ISA, it's all there to keep us when we've stopped working.

Equally there are plenty of retired people who have no property or significant savings, many people seem to live quite good lives like this.

But, I would caution that boats eat money. Owning a boat that I struggled to afford to run would be awful. I'd rather have a cheaper/older/tattier/more modest boat that isn't giving me worries about having wasted money on it.

 

[alant]

My parents, both dead now, asked me about equity release as a way of generating funds to enjoy their retirement and improve our childhood home, although not to buy a boat.

As Bedouin says, I suggested a much better way. We get the house valued and then we three Sons all purchase a percentage of the house depending upon how much we can afford. A solictor draws up the 4-way agreement that when both parents die the net proceeds of the sale of the house are shared out in the same percentages. The percentages could be equal, like 3 x 5%, or unequal depending upon how much is needed. The agreement is worded such that the risk is all ours ........ but whoever lost money over the long term on property?

Part of the money was also used to improve the house so that also increased the value our investment. If the money was used to buy a boat that might pass to the children eventually, if not sold, so some of the money gets "re-cycled" in a similar way.

Total cost of arrangement ...... £200!

Richard

Isn't that arrangement "a gift with benefits"?
If so, the tenants (your parents) apparently have to pay a commercial rent, or used to under IHT regs.

Also, will the house value, always outpace your mortgage interest payments?
I am interested, because it could be an 'investment' for my kids & lots of cash for their parents to enjoy.

 

[GrahamM376]

We downsized house to draw money out but, after a friends experience, wouldn't touch equity release. They had done it some years before they became too infirm to live with stairs so looked at selling and buying a flat. Unfortunately, the interest on the equity release left them with a very big shortfall.

 

[bedouin]

My parents, both dead now, asked me about equity release as a way of generating funds to enjoy their retirement and improve our childhood home, although not to buy a boat.

As Bedouin says, I suggested a much better way. We get the house valued and then we three Sons all purchase a percentage of the house depending upon how much we can afford. A solictor draws up the 4-way agreement that when both parents die the net proceeds of the sale of the house are shared out in the same percentages. The percentages could be equal, like 3 x 5%, or unequal depending upon how much is needed. The agreement is worded such that the risk is all ours ........ but whoever lost money over the long term on property?

Part of the money was also used to improve the house so that also increased the value our investment. If the money was used to buy a boat that might pass to the children eventually, if not sold, so some of the money gets "re-cycled" in a similar way.

Total cost of arrangement ...... £200!

Richard

I guess that was several years ago - such an arrangement would be much harder now under the "Pre Owned Assets Tax"

 

[RichardS]

Isn't that arrangement "a gift with benefits"?
If so, the tenants (your parents) apparently have to pay a commercial rent, or used to under IHT regs.

Also, will the house value, always outpace your mortgage interest payments?
I am interested, because it could be an 'investment' for my kids & lots of cash for their parents to enjoy.

I used the same Solicitor (my parents long term Solicitor in Sheffield) to deal with all probate stuff surrounding my Mum's death in 2014 (Dad died first) as they had used to draw up the % sale agreement. There were no tax or IHT costs arising from the agreement. The Solictor also drew up the % sale agreement such the Sons and DiL's were each joint owners of the share. Upon the house sale the profits were split 50:50 between each party so everyone got their maximum CGT allowance.

I'm prepared for incoming "aggressive tax avoidance" accusations. :encouragement:

I didn't answer the investment bit .... but as long as the duration of the deal is long enough (in our case it was 15 or 20 years I think) then property will always triumph but, even if it didn't, you've repaid your parents in a small way for everything they have done for you.

It sounds like these days you might need a specialist tax solictor but there are always ways and means to an end. :encouragement:

Richard