Equity Release to buy a boat

[alant]

as a financially astute person i would avoid equity release schemes like the plague, there are far easier ways (and safer more cost effective ways) to release money from your home, if indeed that's how you want to finance a boat..

just re-mortgage, taking out a larger loan and freeing up the cash (or equity as people call it), every bank does it, cut out the "middleman" selling a scheme at inflated costs, your mortgage repayments will always be less than the rent you will pay these crooks, and you still own your own home etc.

so age is no problem, kids have to fend for themselves somewhat, it would be quite selfish for them to think otherwise, everyone has dreams after all, and you're not being selfish fulfilling them!

but equity release..... please at least talk to a financial adviser as its just the same as claiming PPI - why give a company a cut for doing absolutely nothing?

"age is no problem"?
Thought that a combined age of 150 yrs, was necessary, or used to be, to make them so called 'viable'.

 

[RichardS]

Right, I always believe estate agents.

What are you on about Alan?

It doesn't matter whether you believe them or not. All you need is a piece of paper to show HMRC in 10 or 20 years time to show that you had an independent valuation of the property. In our case, even though we "aggressively avoided" virtually all CGT and paid no IHT, HMRC were not the slighest bit interested in our written valuation and did not even ask to see it.

In any case, can you imagine a discussion with HMRC about a valuation written 20 years earlier. You would be able to run rings around them as they are, self-evidently, not that bright.

Richard

 

[fisherman]

I have in the past suggested renting out the house, too big for us two, and renting a small flat/house elsewhere, also spend time on a leisure boat perhaps. It was pointed out that tax will be payable on the incoming rent, which might be a problem. We might accrue £400 a month, but then have all the problems of BTL.

 

[nimbusgb]

Abso bloody lutely!

Spending 'our' inheritance ..... sod that. I'm spending *my* hard earned money!

But as has been stated DON'T go equity release way. Downsize .... drastically ( It'll teach you about how to live in a tiny space with no room for clutter ) If you can swing it buy a new cottage for yourself and a small flat in a university town to rent out as running cost cover for the boat.

 

[Cactus Sailing]

"age is no problem"?
Thought that a combined age of 150 yrs, was necessary, or used to be, to make them so called 'viable'.

You mean with the equity release scam?, basically they want you dead so they can flog your house on while charging an exorbitant fee to do so ensuring the next of kin get nothing, if you don't die they will charge you above the national average to rent it back off them, so i guess 150yrs minimum is their ideal target audience

its a win win for the companies doing these schemes anyone would be nuts to sign up but it happens.

i was referring to "is it ok for pensioners to do this sort of thing" and yeah age isnt a problem,

 

[pvb]

.... if you don't die they will charge you above the national average to rent it back off them,

I reckon you need to check your facts before posting.

 

[Tranona]

I reckon you need to check your facts before posting.

Agree. Amazing display of ignorance about the subject. Some of the earlier comments are also way off beam and do not reflect the current schemes available in the market.

There is clearly a demand for such schemes as evidenced by the amount borrowed in recent times, helped by the changes that make them more attractive to certain types of borrowers. The two major reasons people take them are to replace existing borrowing (often interest only mortgages that are coming to an end) and fund home improvements.

 

[RichardS]

Agree. Amazing display of ignorance about the subject. Some of the earlier comments are also way off beam and do not reflect the current schemes available in the market.

There is clearly a demand for such schemes as evidenced by the amount borrowed in recent times, helped by the changes that make them more attractive to certain types of borrowers. The two major reasons people take them are to replace existing borrowing (often interest only mortgages that are coming to an end) and fund home improvements.

PVB was probably questioning one "fact" in particular.

Richard

 

[GrahamM376]

Agree. Amazing display of ignorance about the subject. Some of the earlier comments are also way off beam and do not reflect the current schemes available in the market.

There is clearly a demand for such schemes as evidenced by the amount borrowed in recent times, helped by the changes that make them more attractive to certain types of borrowers. The two major reasons people take them are to replace existing borrowing (often interest only mortgages that are coming to an end) and fund home improvements.

There may be some good schemes out there but, remember they all exist to make as much money as possible in the long run for the lender. Equity release may be a good option for the coffin dodgers whose next move will be to the rest home or crem but, as my friends found out, borrowing on such a scheme too early in life can lead to such high compound interest that virtually no equity (or even none at all) is left when wanting to downsize after a few years to more suitable accommodation.

 

[Tranona]

There may be some good schemes out there but, remember they all exist to make as much money as possible in the long run for the lender. Equity release may be a good option for the coffin dodgers whose next move will be to the rest home or crem but, as my friends found out, borrowing on such a scheme too early in life can lead to such high compound interest that virtually no equity (or even none at all) is left when wanting to downsize after a few years to more suitable accommodation.

The major downside is the higher interest rates compared with a conventional term mortgage, although still far lower than any unsecured borrowing. However, normal mortgages are not available to many older people and interest only particularly hard to get if not impossible.

You have to recognise that some people just retiring may have several hundred 000's equity in their house, other savings tied up mostly in pensions, enough income to live comfortably and can see 10-15 years' active life ahead. Releasing, say 20% equity to buy a boat might well make sense, paying the interest rather than rolling it up. The loss in value of the boat over time is offset in part by the increase in value of the house. This is essentially no different from increasing a mortgage earlier in life to buy a boat which is what I did.

This scenario is very different from the image of releasing 50% and spending much of it on holidays or other consumer spending together with day to day living - and letting the interest roll up for 15-20 years - which is the image of those who shout "scam".

There are many other reasons why releasing equity later in life might be a good course of action - passing assets onto children/grandchildren while they are younger and perhaps have more need, reducing overall asset value to minimise tax, making use of potentially IHT exempt gifts, adapting house to make it possible to live in rather than go into a home etc.

It is not right for everyone, but to dismiss it out of hand as some here have is wrong. It is just one way of using your assets to achieve your life objectives.

 

[savageseadog]

The major downside is the higher interest rates compared with a conventional term mortgage, although still far lower than any unsecured borrowing. However, normal mortgages are not available to many older people and interest only particularly hard to get if not impossible.

You have to recognise that some people just retiring may have several hundred 000's equity in their house, other savings tied up mostly in pensions, enough income to live comfortably and can see 10-15 years' active life ahead. Releasing, say 20% equity to buy a boat might well make sense, paying the interest rather than rolling it up. The loss in value of the boat over time is offset in part by the increase in value of the house. This is essentially no different from increasing a mortgage earlier in life to buy a boat which is what I did.

This scenario is very different from the image of releasing 50% and spending much of it on holidays or other consumer spending together with day to day living - and letting the interest roll up for 15-20 years - which is the image of those who shout "scam".

There are many other reasons why releasing equity later in life might be a good course of action - passing assets onto children/grandchildren while they are younger and perhaps have more need, reducing overall asset value to minimise tax, making use of potentially IHT exempt gifts, adapting house to make it possible to live in rather than go into a home etc.

It is not right for everyone, but to dismiss it out of hand as some here have is wrong. It is just one way of using your assets to achieve your life objectives.

I for one think Equity release is an appalling idea especially if downsizing is an option. I don't think there's anything to commend it. I've seen the consequences.

 

[GrahamM376]

Releasing, say 20% equity to buy a boat might well make sense, paying the interest rather than rolling it up. The loss in value of the boat over time is offset in part by the increase in value of the house. This is essentially no different from increasing a mortgage earlier in life to buy a boat which is what I did.

But what you're describing here is using 20% of the value of the house as a secured loan, not "equity release" as in signing your house away. Increasing the mortgage may seem attractive but, although interest rates are low at the moment, it may mean some people are paying it for 20 years or more and interest rates will rise during that period.

 

[Tranona]

But what you're describing here is using 20% of the value of the house as a secured loan, not "equity release" as in signing your house away. Increasing the mortgage may seem attractive but, although interest rates are low at the moment, it may mean some people are paying it for 20 years or more and interest rates will rise during that period.

As I said earlier "Equity release" is a catchall term that covers a variety of different schemes. The type I described still has no capital repayment until death or moving into care so is NOT the same as increasing the mortgage, which is not normally available to people over 70. Indeed one of the main uses is to replace mortgages that have come to term and no means of repaying the capital, perhaps because the endowment linked to the mortgage has not performed.

 

[Tranona]

I for one think Equity release is an appalling idea especially if downsizing is an option. I don't think there's anything to commend it. I've seen the consequences.

You are just falling into the trap of using examples from the past with which you are familiar and ignoring what is available NOW, which in many cases is very different from the schemes of the past which often did turn out to be bad or wrongly sold.

Suggest you get yourself up to date with the current schemes (and those coming on line from some of the biggest financial providers such as L&G) before dismissing them.

 

[oldgit]

The future....
Interesting feature on R4 this morning.
Threat of nuclear war and the market does not even blink, share prices rise !
Folks are borrowing to play the stock market.....House prices on the up..
Credit card borrowing virtually back to pre crash .
Virtually every new car on some sort of drip finance.
Thousands of unsold unsellable old boats lurking on the websites.
Foodbanks and programmes about evictions and repro men clogging up TV.
10 years since the last "correction"
Is this really the time to be taking advantage of "interesting" new borrowing wheezes where some salesman is going to get a very nice and immediate slice of the action before he/she/they disappear over the horizon, probably on very nice motor yacht indeed..
Do we never learn ?
It started with Tulips !

 

[alant]

I for one think Equity release is an appalling idea especially if downsizing is an option. I don't think there's anything to commend it. I've seen the consequences.

"Downsizing" in my village is impossible, small bungalow's suitable for Derby & Joan, cost almost as much as 4 bed detached properties.

 

[alant]

As I said earlier "Equity release" is a catchall term that covers a variety of different schemes. The type I described still has no capital repayment until death or moving into care so is NOT the same as increasing the mortgage, which is not normally available to people over 70. Indeed one of the main uses is to replace mortgages that have come to term and no means of repaying the capital, perhaps because the endowment linked to the mortgage has not performed.

Mortgages these days, have moved on, to age 75 as the usual redemption age, but can be taken for another 5 yr period on a repayment basis.

 

[alant]

The future....
Interesting feature on R4 this morning.
Threat of nuclear war and the market does not even blink, share prices rise !
Folks are borrowing to play the stock market.....House prices on the up..
Credit card borrowing virtually back to pre crash .
Virtually every new car on some sort of drip finance.
Thousands of unsold unsellable old boats lurking on the websites.
Foodbanks and programmes about evictions and repro men clogging up TV.
10 years since the last "correction"
Is this really the time to be taking advantage of "interesting" new borrowing wheezes where some salesman is going to get a very nice and immediate slice of the action before he/she/they disappear over the horizon, probably on very nice motor yacht indeed..
Do we never learn ?
It started with Tulips !

And ended in the South Sea's.

 

[oldgit]

And ended in the South Sea's.

Err the .Com debacle. ?


Next Bitcoin, BTL or Faecesbook or Twatter ...our choice

My tip for dead cert loser.... some of that Wedding tat about to suck in the gullible ?
Still patiently waiting for my Big Ears and and wots her name mugs to rise in value, definately a long term investment

 

[Tranona]

Mortgages these days, have moved on, to age 75 as the usual redemption age, but can be taken for another 5 yr period on a repayment basis.

Many people who get to the stage of retiring with a large mortgage outstanding will have limited options, particularly if they have an interest only mortgage and don't have the funds to pay off the outstanding - or want to preserve their liquid funds. Equity release is one possible alternative and is attractive if the mortgage is relatively small in relation to the value of the house. If you are less concerned about maintaining the value of the house and more concerned about maintaining your standard of living, it becomes even more attractive.

One of the negatives of the older style schemes is that interest rates were much higher than they are now, and in relation to house price inflation. This has changed now and interest rates have fallen, while house price rises in certain parts of the country have risen, so the remaining equity in the house is rising to offset the interest payments.

Anybody interested in going down this route needs to do the sums from their perspective, not from that of others - just like any other personal financial decision. As I noted earlier the number of people going down this route has increased significantly in the last couple of years, although doubt many have done it to splash out on a boat!