# Equity Release



## patp (Apr 30, 2007)

Would be grateful for any knowledge that someone might have on this subject.




Some years ago we took out an interest only second mortgage on our home. This we gave to our daughter to help her buy her first house. She has been paying it. It has 7 years left to run.
Our daughter now wants to buy, with her new fiancé, a home, near where they work, that is more expensive. Having sold the first home (they are in digs near their work) they need the money, in the second mortgage, to add to that so that they can finance the purchase. 
We think she has two choices. Pay off, over the seven years, the second mortgage. This would stretch their finances.
Otherwise would it be a good idea to take out equity release on our house to pay off the interest only second mortgage? They would then pay us back the money to cover/clear the equity release. Do the equity release people allow you to pay it off? 


The second mortgage has to be paid off in seven years so they will have to find a way or we will have to sell our house to pay it. When we took it out we thought that we would have moved and downsized by now. This would have cleared the interest only second mortgage. We could still do that but do not want to be rushed into it and may not want to do it all if we cannot find somewhere we love as much as this house.


Your hear such worrying reports of equity release that it worries me. 
There was an article in the paper saying to only use an equity release company that belongs to a particular organisation.


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## Jmdarr (Oct 9, 2013)

Don't have any advice on equity release but think you have done enough with the help given.dont put your own security at risk it's time for your daughter and new man to help themselves.sorry to be so hard nosed about it but have done the help thing with our kids and now not just the mortgage ,new kitchen ,new scooter,new car all in the name of the grandchildren,will now have to work past retirement age as bank of mum and dad is nearly empty.


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## caulkhead (Jul 25, 2007)

Your last paragraph says it all Pat. You do hear worrying things about Equity release schemes and for good reason. My father -in-law has taken two out against his bungalow and now 'owes' more than the value of the property. He and his wife can stay until they have both passed but when they do the property will pass straight into the hands of the Equity Release company. He now bitterly regrets taking the money out of the property, particularly as at the time it didnt seem that much, but the interest that is applied to the 'loan' amount has increased year on year which together with him living far longer than he expected (he has had MS for 40 years) has resulted in the current situation.

There may be a case for taking a relatively small amount out of your property but I would get independent financial advice BEFORE signing up to anything.

Good luck, Andy


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## EJB (Aug 25, 2007)

A couple of factual points.
ER normally has a *fixed* interest rate....6% at the moment.
It can be paid off but there is a penalty.....something like an extra 10 or 15% of the money owed.
The start point is to do the figures for sensible periods....if the receiver is 70 and in reasonable health work out the cost for say 25 years........then look at the amount owed against the sale price of the property (*on todays price*!)

It does suit some people:smile2:

PS. Downsizing is always better if it fits the situation!

Good Luck.


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## patp (Apr 30, 2007)

Thanks for the replies so far.

Have since found this which spells out what can happen too!

http://www.telegraph.co.uk/finance/...e-loans-may-become-normal-regulator-says.html

They can afford a cheaper property, where they will be able to pay off the 2nd mortgage, and still have enough, from the sale of the first one, to fund the deposit on it. It is just that they have seen their dream property and are looking at options to be able to afford it. Daughter's Fiance is going to ask for a pay rise, too, to see if they can stretch to the dream house and be able to pay off the 2nd mortgage over the remaining seven years. Will mean no holidays etc but we, in our youth, have all been there! He is not very happy about all the interest daughter has been/is paying on the 2nd mortgage as he is very risk averse. Don't think he will be impressed with equity release repayment terms then!


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## MEES (Apr 20, 2006)

Sometimes we all have to let them stand on their own two feet and this makes them the stronger in the end 
Does their current lifestyle include holidays, eating out, take always, sky TV, changing cars furniture, nights out etc etc if so let them do their budgeting without eating further in to your resources.
You have already done your bit 
It's interesting while out in motorhome we seem to have this conversation again and again whilst most of us did it for ourselves 
Good luck!


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## GEMMY (Jun 19, 2006)

Money given to children for houses should always be given in the form of a documented LOAN.


In the event of any breakup of with her husband/partner your LOAN is taken off any monetary split that ensues, thereby saving your money from 50% being given to an 'outsider' of your family.


tony:serious:


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## Mrplodd (Mar 4, 2008)

As others have said.

Its time that they stood on their OWN two feet. By the sounds of it you have done more than enough in the past.

Equity release is something that you need to get some SERIOUS and VERY professional advice on. My immediate instinct would be NO ******* way !!!! You need to secure YOUR future.

Time to say "sorry we would love to help but we have done enough, its time for you to go your own way" Either that or advise them that the property you have will be hers (NOT theirs!) one day and she can either wait until then or sort something out FOR HERSELF. Its not your job.

If you are not careful you COULD end up with nothing whilst they have everything as a result of your, rather than their, hard work.

No no and NO! again. they will simply have to do what the rest of us have done. Be ruled by their head and NOT their heart and buy what they can actually AFFORD !!

I would like a brand new tag axle MH with a huge payload, but I am not in a financial position to do so. 

Lifes a bitch aint it????

Andy


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## Brock (Jun 14, 2005)

Equity Release Schemes are a long term commitment, the longer you live, the greater the cost. To work out whether it is right includes estimating when you are likely to die.

Have a look at this
http://www.which.co.uk/money/retirement/guides/equity-release-explained/equity-release-schemes/
I'm a bit rusty on land law and law relating to mortgages but I would strongly urge you to consider legal advice or at least do some thorough research yourself. There is more to think about than just ERS.

Does your mortgage company know that your daughter is paying off your second mortgage either directly or indirectly? I doubt they will be bothered if there is plenty of equity in your house so don't start worrying now.

Do you know on what terms the new property will be held? The old fashioned way is 'joint tenants' where if one party dies, ownership automatically vests in the other. Increasingly, people hold property as 'tenants in common' where if one party dies, then that party's interest in the property goes to that party's estate which in the fiancé's case, may not be your daughter. Either way, you could release equity in your property to help fund a joint purchase and then find the chap claims an interest in the property which you have kindly paid for. Even if the property is just in your daughter's name, there are circumstances which would allow the fiancé to claim an interest. Worse is that your daughter dies tragically soon after the wedding and the husband inherits all the assets and you are left with the bill. So you need to ensure your investment is protected - a solicitor should advice on the right solution.

Love is a wonderful thing but it can't half bite you in the pocket.

What you are thinking of doing is loaded with risks for you as you start the approach to old age and benefits for your daughter and fiancé. Don't be bullied into doing this and be prepared to accept it might adversely affect your relationship with your daughter. Don't be afraid to do this if you really, really want to do it because with your eyes open and with good luck, it could be made to work for a price.


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## cabby (May 14, 2005)

You would be doing yourselves and your family more good if you downsized rather than considering taking out loads.

cabby


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## aldra (Jul 2, 2009)

My advise would be stand back and let them sort out their own affairs 

They are young enough to dream about a dream house for a good while yet

Meanwhile they have a home and can work and save hard to better themselves 

You have a life to live and you've done your share and more

I remember my son going through a bad patch financially and requesting help 

But you have savings said Albert 

Yes but I'm saving that for a rainy day

Son, Albert said, It is raining!!!

We will help all our kids and grandkids with necessities

The dreams they need to achieve alone

They are the wants of life, not the need

Aldra


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## patp (Apr 30, 2007)

Thanks again for all the advice.


It is much the way we were thinking ourselves.


I have given my daughter the "when we started out we had to buy dumps, live in them, and do them up while working full time" speech. They are a good, sensible, mature couple who are just looking at all the options. I don't blame them.


We could downsize but we have some land attached to the cottage and it could be considered for building in the near future. Very frustrating because it might happen and it might all be too late for this opportunity. Still, that is life, we cannot always have what we want when we want it.


We have always said that she can have what is left of our estate if we leave anything at all!


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## nicholsong (May 26, 2009)

Pat

I am surprised that nobody has asked your age, because that is very relevant to decisions on Equity Release. With the increase in longevity I personally would not advise entering a scheme till 75+ and, with interest rates of 6% , only for about 20-25% of the current equity value. That way there is a fair chance that the increase in value of the property will equate to the accumulated debt.

I endorse Brock's analysis of the risks and his advice to consult a lawyer however the house will be financed. 

Geoff


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## patp (Apr 30, 2007)

nicholsong said:


> Pat
> 
> I am surprised that nobody has asked your age, because that is very relevant to decisions on Equity Release. With the increase in longevity I personally would not advise entering a scheme till 75+ and, with interest rates of 6% , only for about 20-25% of the current equity value. That way there is a fair chance that the increase in value of the property will equate to the accumulated debt.
> 
> ...


Only a mere 67 and 65 at the moment so looks like a definite no no for us then. Thanks for the advice.


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## EJB (Aug 25, 2007)

The increase in value of a property should never be considered with reference to a future debt.
Obviously that is just my none expert opinion:wink2:


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## aldra (Jul 2, 2009)

Well

Certainly not to fulfill a dream

That's not your dream

So ok it is in a way

But we have 6 kids, 6 Dreams

10 grandkids

Only three dreaming as yet

But our job is to guide them, to love them, to be there when the make they wrong steps

In reality

Not in dreams

Those are special, belonging only to them

They can fulfill those

I've enough to manage the reality

Aldra


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## ThePrisoner (Jan 13, 2009)

There a few things to consider. 
Any money given to children for a deposit usually has to be considered a gift not a loan. I take it that they are paying the 2nd mortgage unofficially and if they chose not to pay it there is nothing you could do except pay it yourself.

Therefore it is your home at risk if they end up in a lifestyle they cannot afford.

As every one has said, best to let them find their own way without your help.

The only thing no one has commented on is that with the better equity release providers the loan will never have to be repaid and it will be guaranteed never to exceed the value of your home.

Therefore if you never plan to move and only have one daughter, you will just be giving your daughter her inheritance early, albeit, much less than she is likely to get.

This could end up being an advantage Iif either of you end up in care.

The equity release council is the body you are looking for the provider to be a member of (formally ship).

And any adviser needs to have the specific qualification and if done correctly with everyone'seyes wide open Iis not automatically bad.

Therealso plans whereby you can withdraw small amounts from a larger authorised sum. I.e 110k 
facilty but only 25k required. 75k left for future. Interest only charged on amount borrowed.

last but not least. Never take out
An equity release loan Iif you intend to repay it prior to second asthe penalties are horrendous.

Sorry one more thing. How many mortgage advisers have they consulted as different lenders have different criteria and you may find that someone may actually do the deal for them


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## Stanner (Aug 17, 2006)

> Some years ago we took out an interest only second mortgage on our home. This we gave to our daughter to help her buy her first house. She has been paying it. It has 7 years left to run.


This bit puzzles me you say it is interest only and that she has been paying it off.

But paying what off? 
Just the interest or some of the capital as well.


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## ThePrisoner (Jan 13, 2009)

Good point stanner. In 7 years the lender will expect to receive payment in full. There are loads of stories of pensioners getting into financial difficulty due to interest only mortgages maturing and having to move home. 

Before they consider buying a new house, consideration needs to be given as to how that mortgage will be repaid


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## patp (Apr 30, 2007)

It was always the intention that either she would sell and use the equity in her house to repay the 2nd mortgage or that we would downsize and do it first with her paying us back eventually. She, along with her dad, renovated the first house from a dire state and so had enough equity in it to repay the loan when necessary.
She has only every paid the interest although as interest rates dropped she carried on paying at the original figure so that the loan has reduced slightly.


We have long had plans to downsize so that was never going to be a problem. It would be nice, however, to not have a seven year timetable put upon us.


She has now sold the first house and has enough equity to pay off the 2nd mortgage and buy a cheap house in the, much more expensive, area where she now lives and works. So, in effect, the plan worked. She managed, on her own, to buy and renovate her first house and make enough on it to clear her mortgage, and the interest only loan, with enough left over for a deposit on her second home.


We were just exploring all the options available to her now. My daughter's fiancé is not happy that, if they go down the dream house route, they would be paying the interest only loan and wanted to clear it if possible. Hence the thoughts about equity release.
I don't think, given what advice is on here, that they will pursue the equity release option. I think that they will either pay off the interest only loan, with the equity they have, and buy a cheaper house, or look to see if they can afford the dream house and pay off the loan within the 7 year timetable. 
The honeymoon may have to go. They may have to furnish with second hand furniture etc. That is all up to them to decide. Both highly intelligent people in good jobs so they have options.


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## MEES (Apr 20, 2006)

Sounds like they are working bit all out 
I trust the fiancée has something tangible to add to the equation .
Our generation usually had minimal financial help from our parents and lived with minimal spending whilst we got established.
Inexplicably we all have a burning desire to spare this character building stage from our children's lives.
Bear in mind you relative " wealth" could have to last YOU thirty years.


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## patp (Apr 30, 2007)

Good point about the equity having to last us a possible 30 years.
The fiancé is a saver and, I hope, is putting his savings into the equation. I doubt very much that he is putting nearly as much as my daughter though. He has not long finished his PhD and is just starting out on his career. He worked during his studies wherever he could. It does concern me, though, and I sometimes think that I ought to put in my two pennyworth and advise that they have some sort of pre nuptial agreement. Perhaps the opportunity to discuss it will come up over Christmas?


I also agree that we worked it all out with no help from our parents etc. We did not even have any inheritance from our parents. All our friends and neighbours have had that cushion in their later years. We have brought our daughter up to be independent and she has, so far, made us proud in that respect. She would honour any agreement to pay back the loan and I am sure her future husband is keen to be debt free. He has been brought up in a "no debt" family who do not even have credit cards.


I, too, wonder where this desire to help this generation onto the property ladder comes from. It would not have entered my parents' heads to help us onto the property ladder. They were surprised, and worried, that we contemplated it at all. We were just left to make our own mistakes. Luckily we made our way through the property buying minefield and are quite proud of our achievements in that respect. Yes, property prices are high nowadays but so were they, relatively speaking, when we first started out. I think the difference is that there was always the option, for us, to go down the council house route. Todays youngsters are, if they cannot afford to buy, at the mercy of the whims of private landlords.


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## MEES (Apr 20, 2006)

Sound like fiancée has been brought up to stand on his own feet financially.
Bravo for helping daughter get on the property ladder initially perhaps now is time to back off and leave them yo it . Even if they struggle they too will be proud of their achievements in the long run.
I applaud your confidence in your daughters willingness to repay loAns but both your and her circumstances could change.....
Have you resolved how the capital is to be paid off from the previous loan ?


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## nicholsong (May 26, 2009)

I think that you have not said what ages your daughter and fiance are.

I sometimes wonder whether young people today expect too much too early in life - they want to go out regularly but also want to own property.

I was 32 before I could afford to buy and I was a co-pilot with BA on just £5,000 p.a and could just afford a mortgage, when BSocieties worked on a 3X salary/loan ratio, even then it only bought me a three-bed house with no bathroom and which needed doing up from scratch.

I lived a very basic life for 3 years while doing it up.

As for 'dream' houses, maybe some young people should stop dreaming and you could keep your money.:wink2:

Geoff


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## aldra (Jul 2, 2009)

We have helped all our kids get their first property

Nothing fancy,deposit on a two up two down terrace house to start them off on the property ladder

And to get them out of our home!!!

Found as they returned from Uni, they no longer fitted into the family structure, had their own ideas how they wanted to live which doesn't fit into large family living

We are not the Walton's!!!!

From then on they were on their own property wise, as they earned more they could update their houses

Hopefully when we die they will be left a legacy, but as Margaret says that may be soon or much later 

Meanwhile we help grandkids go through uni,to buy their first car, etc

The key thing is WE are in control of what we give

They have time to fulfill their dreams 

We need to ensure we can live out our remaining years without financial worries
And still be here to support

Aldra


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## GMJ (Jun 24, 2014)

By far and away the best advice that has been given on this thread is to get some proper independent financial advice...even if you have to pay for it.

Regarding kids and helping them out (just to add some grist to the mill..and just my view and not judging anyone else)...

...our eldest inherited 40k when he was 21 from his late gran. He chose to p1ss it up against a wall in 18 months. He now rents.

The youngest (eighteen yo) is looking forward to getting his lump as he intends (and will, having learned from his brother's mistakes) to use it as a deposit on a property. 

Neither will get financial help from us but are welcome to whatever is left in the estate when we toddle off!

Graham:smile2:


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## aldra (Jul 2, 2009)

ps

It seems to have worked

We now have 6 kids and 5 partners all living close, all coming together as one big family, 10 grandkids that come and go

Every Friday meals of 15+ 

Christmas Day 16 

Boxing Day the whole lot + Albert's younger brother and family

I sort of raised him from 14 when his mum died and he was in love with me
Still is and I with him

His wife just raises her eyebrows and says whatever
I love her too

But it's all time limited, I'm not getting any younger

But as long as we can we will hold this family together

And Albert with his family's consent will remain the Patriach 

An old fashioned notion

But sometimes old fashion notions have merit


AldraAnd there are far more important things than dreams


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## Brock (Jun 14, 2005)

I had to get married to get a mortgage, it was a condition of the loan. The mortgage company didn't take the missus back when I paid off the mortgage though.


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## aldra (Jul 2, 2009)

Gosh Brock

Was she tied to you for all that time ?

Aldra


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## patp (Apr 30, 2007)

The happy couple are in their thirties and have done a lot of travelling etc so ready to settle down. When I say it is their dream property, it is a 3 bed semi in a nice village setting. No immediate work needs doing. If they repay the loan, out of the equity they have, they could only afford a small 2 bed terrace on an estate. Nothing wrong with that and, I am sure, that if the numbers do not stack up, that is what they will go with. Just would be nice if they could get the one they really like rather than the one they have to settle for. Wouldn't we all want that? 
Might all be academic, though, because it is nice and property sells really quickly in Kent. They are in a strong buying position but who knows?
At the end of they day we all want our children to be happy. That does not mean spoilt, just happy  The only thing our daughter has ever asked us for, in her whole life, is scuba diving lessons! We tested her resolve to go through with the course by asking her how much of her savings she wanted to put towards the lessons. When she said "all of it" we knew she was fully committed! She is now a qualified PADI Divemaster. Anyone who has learned and qualified in uk waters will know how character building it is!


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## aldra (Jul 2, 2009)

You know your daughter

But you need also to consider your future

They will survive and go on to better things

You need to ensure you too can progress to better things

Aldra


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## Brock (Jun 14, 2005)

We're mere youngsters in the marriage stakes, just 36 years last month.

My first boss invited my fiancee, as she was then, in for a cup of tea to ensure she was suitable for me and my career. It was similar to her Dad wanting to know what my future prospects were although my boss had a genuine affection for the two of us; not so sure about her Dad! 

When I started work, he gave me two bits of advice. Always wear a dark suit so as not to show the splash backs. Never get involved with a woman from work because you will fail to perform one night and all the office will know the next day.

I guess it's a fine line between pastoral care and interference. The former worked well for me.


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## aldra (Jul 2, 2009)

Gosh Brock

36 yrs to pay off the mortgage

Is she free now?

Me now 51yrs, I'm sure that mortgage was paid off long ago

I haven't the energy to make a bid for freedom!

I'm going for 60

Well you need a goal don't you?

Sandra


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## mistycat (Jan 28, 2014)

We also had to get married so we could have a house,,
Army quarters were only given to married couples back then,
Common law wives were not recognised in the army, in my days,
Misty


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## 113016 (Jun 5, 2008)

About 4 years ago, our Daughter was going to buy an apartment, partly funded by the help to buy or jointly owned by the whoever.
I could see that it was not good financially for her. so I offered to loan her a substantial sum so she could buy a 2 bed extended semi, herself.
Over the last four years, she has paid her way, no money from Mum and Dad and about two years ago, she acquired a partner,both are now on pretty good salaries, but do work very long hours. They have just traded up and jointly purchased a 4 bed detached.
But the point of my post is, that during our conversations, I did say, it would be nice if they could return nearly half of the loan I gave to her, and I would give the other over half as a gift.
On the day of completion of her sale, I received a substantial sum as agreed! (incidentally, I never expected to get a penny back)
I could have written it all off, and made it easier for them, but I thought better to let them struggle a little if they want such a large house, which they don't need, as one day, when we go up the stairway to heaven, or the slide to hell, they will get it back and with much more!
My advice is, help them, but don't make it too easy!
And DONT jeopardise your own security!


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## GEMMY (Jun 19, 2006)

Some years ago my son entered uni, fine he was in the uni campus, after the first year he was expected to vacate, the hovels locally offered were:surprise: so him and I trawled the estate agents for his area, we found a modern flat, I bought it for him in his name. The little sod then rented out the spare bedroom to his mate :wink2::surprise::smile2:
That's the way to start them off.:wink2:


tony


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## Harrers (Dec 21, 2011)

Some great advice on here. The only thing I would add...

Sounds as though your daughter and her fiance have there heads screwed on but if they struggle to buy the dream house, it will be a lot more difficult when interest rates go up as they surely must eventually. 

The mortgage lender should not allow them to borrow more than they can afford and should factor in future rate rises when calculating this.


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## patp (Apr 30, 2007)

Just to update everybody. They have had their offer, on the house, accepted and they are going to pay off the loan as fast as they can. If they get to the seven year deadline, with a balance still to pay, then they will re mortgage to cover it. They hope to have even better paid jobs by then too. 


Thanks to those wise ones for their advice on the equity release question and lots of other "life" wisdom thrown in. Knew I could rely on you all!


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## ThePrisoner (Jan 13, 2009)

As the original discussion was about equity release, found a very interesting article/take on the subject from a financial journalist. http://www.ftadviser.com/2015/11/26...ly-option-1HN0O0rq7OoqNrLW2fEv7O/article.html


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## nicholsong (May 26, 2009)

ThePrisoner said:


> As the original discussion was about equity release, found a very interesting article/take on the subject from a financial journalist. http://www.ftadviser.com/2015/11/26...ly-option-1HN0O0rq7OoqNrLW2fEv7O/article.html


Thanks for that.

My comment is that the article is concentrating on equity release being used to fund the owners' retirement and make them more financially free with a better 'pension' *to spend on themselves, not to give away.

*Geoff


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## patp (Apr 30, 2007)

Thank you. Yes, as has been said above, I think it is something to consider when, perhaps, over 75 and in need of care or significant home improvements to make life more comfortable etc.


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## aldra (Jul 2, 2009)

The truth is parp 

You may still be alive at 80 or 90 with a bit of luck

And you need to provide for that eventuality 

And if you are not

So your kids get it in the inheritance 

Once you are dead 

Not before 

Aldra


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