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Eqity Release
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Has anyone had experience with this type of financing.
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I did it a few years ago, and it worked very well for me, I wanted to clear my working overdraft, so took out equity release loan over a 10 year period, it was charged at the same rate as the mortgage, with no penalty for early settlement,, managed to clear it withing 3 years just by paying a little bit over required payments and far cheaper than overdraft. Ray
depends what you intend to use it for. With respect to ray, what he did is not equity release in the sense that it is used by most people using that term. He just borrowed some money at mortgage rate and repaid it.
Equity release is usually used to describe what, old people do when they are asset rich and cash poor. There are many variants, eg house owned worth 200K but no money for say a dream holiday or a conservatory or just to live on. Companies will lend but charge no repayments until some time in the future or indeed death. This has a horrible way of eating equity. eg say the house is worth 200K and you want to borrow 20K for a conservatory, not a lot you may think but remember you cannot afford to repay in the usual way so going for equity release the interest is rolled up and compounded, now suppose you live for another 10 years? the debt is (assume 6% annual interest for this calc), you now owe 36k, still not too bad, what if you live 20 years? you now owe 64K and that's starting from 20k, so you can see it will eat your equity very fast. Not to mention what falling house prices will do.
Bottom line: don't touch with barge pole!
Equity release is usually used to describe what, old people do when they are asset rich and cash poor. There are many variants, eg house owned worth 200K but no money for say a dream holiday or a conservatory or just to live on. Companies will lend but charge no repayments until some time in the future or indeed death. This has a horrible way of eating equity. eg say the house is worth 200K and you want to borrow 20K for a conservatory, not a lot you may think but remember you cannot afford to repay in the usual way so going for equity release the interest is rolled up and compounded, now suppose you live for another 10 years? the debt is (assume 6% annual interest for this calc), you now owe 36k, still not too bad, what if you live 20 years? you now owe 64K and that's starting from 20k, so you can see it will eat your equity very fast. Not to mention what falling house prices will do.
Bottom line: don't touch with barge pole!
Got to say I agree with R1, in as much as although mine was an equity release loan, I would never sell all the equity in a house just to raise money to live, some of these schemes are a complete waste of time, and can end up costing a fortune.or in fact lose the property. as R1 says, I was only looking at it from what I did, and it worked for me.
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