Equity Release Puzzle

This is another follow-up to my post “Equity Release Revisited” which prompted me to look into the subject again and start a new series of blogs on the subject.  I first wrote about this in 2012 and then again in 2015.  (You can find my earlier posts by clicking on Equity Release in the TAG CLOUD).

After hours of research on the internet, over a period of several weeks, I am still not much further on in trying to get some basic facts and figures about the cost of Equity Release.   I’ve ended up with a lot more questions than answers so I’ve got to keep digging.  

  • What are the interest rates that are charged and how do they vary with age and health?
  • How far can you use the loan on luxuries before the taxman determines that they will be considered “wilful disposal of their income”?
  • Do the local agents get any fee if you decide not to proceed?
  • What’s the average loan that people take out and at what interest rate?
  • If the average interest rate is 6%, surely that means that more people taking out Equity Release are the younger elderly?  Therefore the biggest risk to the loan provider.  Leading to a higher level of “compounded” interest.
  • Just how exactly is your property sold if you move into care, or die?  Surely the Equity Release company will want to control this.  If the loan plus interest exceeds the value of your home, they will want to get the highest sale price possible.   But, if their loan plus interest is lower than the value of your home, they will want a speedy sale and therefore may not seek the highest value to the detriment of the legacy you might leave.

The fact that Equity Release loan companies are so reluctant to be transparent about these critical questions, doesn’t lead you to believe that their products are good value.  It’s also a concern that to get any further information you have to share a lot of personal financial and health information with a “Financial Advisor” who you have never met before.  This is a crass way of doing business with older people!

I’ve no doubt I’ll be writing about this subject again in the years ahead.  Hopefully not after yet another crisis has emerged about Equity Release.

This entry was posted in ELDERLY MARKET, Grey Products and tagged . Bookmark the permalink.

2 Responses to Equity Release Puzzle

  1. interesting, a first stop I have found, is https://www.moneyadviceservice.org.uk/en/articles/equity-release
    Here the advice is general: However each step of type of equity release is described, and the details one is required to know are highlighted, and advised to seek further information-but with given precautions as to any charges that may be levied {again not in detail but general]. It is sobering, and for those of us who have made an earlier life decisions as to finances in old age, makes one question in detail? did we seek the right advice and as a result make the right decision. It is all personal, and one has to trust the people to and with whom they make a contract- the old adages of ‘Buyers beware” comes to mind, and if it looks too good, then look behind you and do not be greedy. Nothings for nothing, it all cost.

  2. It is now December 19th in the UK, we are at the start of the ”Panto” Season [pantomime- a show for all the family, and all generations].
    The auditorium and the stage compete for comments from the audience and the actors?
    Shouts from the auditorium ” he is behind you?” : Where is he/she ” There behind you!” a response from the stage ” No there are not?” From the auditorium ” Oh yes they are!” and then many a response from each side ” Oh No there not!”- Oh Yes they are!”, until the stage give a final comment and accept the truth- the ‘baddie is behind them, to screams of delight from the auditorium.
    At the end of the Pantomime and the curtain call- the badies get Hissed/Booed!, while the goodies get cheered to the roof tops!
    One goes home happy that things have not changed to much, just that one recognises the baddies, and in the end the good guys/dolls win our hearts.
    That’s life!

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