Equity Release to buy a boat

[dunedin]

OLD THREAD WARNING - but also a head up that this is being covered on BBC Moneybox today.

Was discussed briefly on BBC Breakfast Time this morning - and basically their summary was ........ pretty much what Tranoma said (not unexpectedly). A useful tool for some, but not for all. They also specifically asked about the previous bad reputation / experience with old style equity release, and the Moneybox expert was adamant that things have changed substantially and much more stringent regulations apply. Still need to be careful, but not a blanket “no no”.

 

[alant]

OLD THREAD WARNING - but also a head up that this is being covered on BBC Moneybox today.

Was discussed briefly on BBC Breakfast Time this morning - and basically their summary was ........ pretty much what Tranoma said (not unexpectedly). A useful tool for some, but not for all. They also specifically asked about the previous bad reputation / experience with old style equity release, and the Moneybox expert was adamant that things have changed substantially and much more stringent regulations apply. Still need to be careful, but not a blanket “no no”.

Also mentioned interest rates around 5%.

 

[GrahamM376]

Also mentioned interest rates around 5%.

No doubt variable rate. Borrow £100k now to buy a boat, £5k for the first year alone compounded over say 15 years at most likely increasing rates = not a lot of equity left in years to come for a move to more suitable accommodation due to infirmity. Not sure if schemes allow house to be rented out to offset interest whilst away sailing?

 

[Tranona]

No doubt variable rate. Borrow £100k now to buy a boat, £5k for the first year alone compounded over say 15 years at most likely increasing rates = not a lot of equity left in years to come for a move to more suitable accommodation due to infirmity. Not sure if schemes allow house to be rented out to offset interest whilst away sailing?

No. Equity release is usually fixed rate (in fact I think always, but have not seen all offers). That is one of the good points from a comparison point of view, as you can calculate exactly what the debt will be at any point in the future (assuming you are not using one of the new flexible schemes that have possibilities to drawdown to a maximum or pay interest , or pay back capital etc.)

The big unknown is future equity value because of unknown house price growth, but in the situation you mention that is largely irrelevant as the new house will be affected the same way as your existing AND you can with newer schemes move your mortgage to the new property. Whatever happens the debt will never exceed the value of the property, which is why such deals are limited in terms of %age value lent and age of borrowers.

As I said many times earlier, these schemes are flexible, but more than most sources of borrowed money they are not for everybody, but the potential number that might find them useful is increasing hence the growth in the number on offer and the flexibility now available. I can certainly see some circumstances where such a scheme might be good for financing a boat for a few years sailing in later life.