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.