Equity Release - a last resort but is it a gamble worth taking?

by Sansorrella 15 November 2009 |

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I am in the position of having recently divorced, downsized my property and now own my own home outright. I am 55 years old and am only just surviving on Incapacity Benefit. The prospect of living on the poverty line, waiting to die so my children can inherit the house is not one I am happy with. I want to release some of the equity in order to set myself up in a business I can do from home, in order to support myself, and so I can pay for certain jobs to be done around the house and garden that I cannot do myself. I stand to inherit from my own mother at some point so feel that its a risk worth taking. I know the interest rates are horrendous and build rapidly over the years. Hopefully I will inherit and be in a position to pay this off long before I die - so should I take the plunge? I don't feel I have any other choices - I know I will also lose the small income that I have from Incapacity Benefit but I'm not managing on that anyway. Is there anyone out there who who released some of the equity in their house and NOT regretted it? I only want to release about £20,000 of a possible £140,000.

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CaptainFlak posted
Have you looked at other options? You are the right age to possibly release some cash from a pension, but please seek proper financial advice before doing this. Not completely sure of the rules but they do change in about 4 months time so you might need to get a move on. Good luck in whatever you decide.
Posted on 15 November 2009 | Love 0 loves Report
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Sansorrella posted
Hi - Thanks. I have looked at every option I can thinks of - bad credit history isn't helping me. I didn't know about the rules changing - will have to see what I can find out about that. It's difficult to get unbiased advice as everyone seems set on selling a product - although I am getting quotes and info from every available source - hence my question on here.
Posted on 15 November 2009 | Love 0 loves Report
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manzanilla posted
It is unfortunate that you didnt decide this before you bought your current place.
What other options do you have? Could you live with your mother? She must be getting to an age where she too needs help around the house and in the garden... Do you have a spare room that you could rent out?
What are your health problems? Has anyone taked to you about whether you will qualify for DLA?
Ar you getting Council Tax Benefit?
What is this business that you are proposing to set up? How much money do you estimate that you need to live on, and how likely is it that this busines could generate that? The nightmare scenario here is of going for ER, setting up the business and still not making ends meet.
nb in theory, IB is not an income or capital related benefit (provided that you have paid sufficient NI contributions). However you would be very unwise to rely on this in your planning. The current governement is tightening up the IB/ESA criteria - over 3/4 of new claimants are being rejected - and this is gradulally being applied to existing claimants too.
manzanilla
Posted on 15 November 2009 | Love 0 loves Report
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MikeGG1 posted
Ignore the comments about the change in pension rules. If you have a personal or company pension available, you can claim it whenever you want, provided the rules allow it. The change is in respect of the minimum age which is going to go up from 50 to 55 in April. As you are 55 already, it won't affect you.
Doubling up with your mother would seem to be advantageous for both of you, provided that you can live under the same roof.
Mike
Posted on 15 November 2009 | Love 0 loves Report
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Sansorrella posted
Thanks for all your advice. I don't have a pension of my own - as I spent most of my married life child minding and such, although I did train as a driving instructor and worked for a while before moving I didn't have the finances to start my own plan.
Doubling up with my mother just isn't an option as we couldn't live under the same roof.
I have taken advice from various sources, including independent financial advisors who I know will be looking for a Lifetime Mortgage with commission for them as well as the fee I will pay them on completion.
I have decided on a roll-over Lifetime Mortgage but will not be taking all the money at once - only what I need now - that way I won't be paying interest on money that will be sitting in the bank and earning me a lower rate of interest than I am paying to have it. Hopefully, once I get my business up and running, I will be in a position to pay off the mortgage within 6 years and it will be easier to pay off if I haven't drawn down all of it.
If it all goes badly wrong I will post on here to warn others.
Posted on 17 November 2009 | Love 0 loves Report

Equity Release - a last resort but is it a gamble worth taking?

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