How does it work?
My parents need to move nearer to us. As always the stuff they need is just above their budget.
They have savings but are reluctant to spend them. Their budget is £200k.
We reckon they could go to £260k. Would they then be able to release that £60k back?
We certainly don’t need to inherit anything so we would rather they buy something nice.
So, how bad are these companies and whats the catch?

Why would they need to release that back? Seems as safer bet in a property at the moment than sat in the bank earning bugger all interest, whilst also paying for the pleasure of having it there via equity release?

They need their savings for general living and treats.
Plus there are all the moving costs.

My nan has done it recently, she’s happy with it but she owned the whole house prior. In theory it is like remortgaging but she couldn’t do that as she has no income as such to pay off the mortgage. Do your parents still work/have a current mortgage? Seems a very risk heavy scenario if they need the equity release cash to live off?

They own their property and there’s no mortgage involved.
My parents are late 70s and the way I read it is that they are selling a portion of their property to the company.

Yes that’s basically it. Saga do a pretty transparent equity release scheme I believe. However have they got the funds to complete the purchase of the “new” house? My nan had to sign up to varying conditions which included the debt being cleared first and foremost when she basically dies.

Equity release like this works based on statistical analysis of life expectancy. That sets an ltv and then they lend you that amount with no repayments due until they pass on. So the older you are the more you can borrow. If you have the income you can borrow on their behalf secured on the house but cash flow is worse as you’ll have current repayments. You get your loan repaid from the sale of the house later on

BE VERY CAREFUL!

Was watching something on tv the other night and a woman had got stung. Signed up to it when her husband was alive and didn’t discover the scale of it until he died.

The ‘loan’ is gaining interest all the time, so £40k borrowed against the house is now £90k – basically they took it out a bit earlier than their 70’s – in a few years the finance company will own all of her house.

What about selling their current property, banking the equity and using that to rent a suitable property close to you?

These equity release schemes seem to only benefit the lenders – its like a car scheme balloon payment, just a big lump of cash sat there attracting shit loads of interest.

My parents did equity release a few years ago (my sister and I told them that we certainly would prefer
them to have the money than think that needed to scrimp to pass on an inheritance). Certainly the loan value will be going up all the time but that’s fine with us.

I’m confused, if they are moving why the need for equity release – or are they just buying an additional property?