Caree Dies , Carer Loses Home : Equity Releases Schemes Under the Microscope

[Chris From The Gulag]

Why are families forced out as equity release firms make a killing ?

After her mother died, a daughter was given just one month to pack up and leave the family home.

When June died at the age of 98 a few weeks ago, it was a painful time for her bereaved daughter, Rosemary. She had moved in eight years earlier to care for her mother, and now had to arrange the funeral, as well as sort out all the paperwork such as the will and death certificates.

What she didn’t reckon on was a repossession demand from an equity release company to clear the house of everything and get out within four weeks. Much is written about the rise of equity release – sales are booming – but very little about what happens on death.

Anyone who has moved from their family home knows that a month is barely enough to arrange the removal people, pack everything, contact all the utility companies and so on. The idea of having to do that in the days after a death, with the funeral quite rightly the top priority, beggars belief. Then add into the mix that Rosemary is herself now in her mid-60s, and suffers from chronic fatigue syndrome.

But there was a lot of money in it for the equity release company. June and her now deceased husband had entered into an equity release contract in 1994, after they had fallen on tough financial times.

Though their home in an upmarket part of north London was, even then, worth a fair bit, the equity release company gave them about £52,000 for a 90% share. When it is sold, it is likely to fetch not far short of £1m, so you can see why the equity release company is so keen to get Rosemary out.

When I was first contacted by Rosemary, I thought it might be a mistake as, while the company had the right to repossess, four weeks is evidently unreasonable. So I called the big providers, Aviva and Legal & General. They said their typical terms are up to one year. They appeared to be as surprised as Rosemary about the four-week deadline to get out.

But June had a different type of equity release scheme, and not with Aviva or L&G. There are two types; so-called “lifetime mortgages” where you take out a loan, but don’t pay any interest on it. Instead, the interest rolls up and on death the original capital and rolled-up interest is repaid from the house sale.

The other type is “home reversion”. This is where a company gives you a lump sum for a share in your home (usually 90% to 100%) and, again, you pay nothing until you die, but it then takes that portion of the home.

Sadly, Rosemary won’t permit me to name the company involved, as she fears they will withhold the 10% share she is owed (it’s pitiable how Britons are now so cowed by corporate behaviour).

But when I contacted a home reversion plan company, it confirmed that four weeks is standard. It told me: “The deed requires the additional occupier to vacate the property within one month of any trigger event under the lifetime lease and we must (and do) stand by this contractual agreement.”

After kicking up a fuss, the company behind Rosemary’s repossession has agreed to give her another two months to get out.

There will be those people who argue that Rosemary’s parents entered into a contract, knew what they were doing, and got the cash. I have some sympathy with that. But just one month to get out? Get lost.

[MrsAverage]

I struggle to think of any circumstance where equality release is a good move. It's money now for huge debts later. I cringe when I see the adverts. I won't be surprised to see mis-selling actions in the future

[Chris From The Gulag]

Never a good move but ... as austerity works it way up the income scale , little option for many ...
short of downsizing and / or moving into another area.

I wonder how many students are financed by equity release loans ?

Or , first time buyers making a move into the property market.

The real fun will start when interest rates start rising.

[MrsAverage]

Never a good move but ... as austerity works it way up the income scale , little option for many ...
short of downsizing and / or moving into another area.

I wonder how many students are financed by equity release loans ?

Or , first time buyers making a move into the property market.

The real fun will start when interest rates start rising.

Downsizing or moving to another area would be a better option, financially.

And don't get me started on the current student loans. They are not a loan, they are a tax and no one should borrow to fund a student. Better save the money and give to them as cash (for the vast majority!) Read Martin Lewis money saving on it.

[Chris From The Gulag]

For far too many , the roof over their head is the only asset ... with earned income just about covering outgoings.

As recent reports have shown , over HALF the population have savings of less than one year's income ... a quarter
NONE at all.

Meanwhile , on the other side of the equation :

Average UK household debt now stands at record £15,400.

Britain's household debt mountain has reached a new peak, with UK homes now owing an average of £15,385 to credit card firms, banks and other lenders, according to the TUC ... January 2019.

[Denis_1610]

Never a good move but ... as austerity works it way up the income scale , little option for many ...
short of downsizing and / or moving into another area.

I wonder how many students are financed by equity release loans ?

Or , first time buyers making a move into the property market.

The real fun will start when interest rates start rising.

Equity release v. downsizing
Equity release? Not for me, though no doubt some can justify it according to their financial circumstances. I don't need it, fortunately.

Downsizing? More attractive as a prospect for the future. Effectively it releases equity from the house sold, while the new, cheaper house is at least a solid bricks-and-mortar asset. There is no third-party interest in either the "equity released" or the replacement house.

As has been pointed out elsewhere in this forum, either of these moves can put one above the threshold whereby one needs to self-fund for care if necessary.

I don't see what use equity release is to first-time buyers. For them it is a struggle to find a 10% deposit on a property, i.e. damn all equity to release.

Housing association
When my father died, he had been living alone in a small flat rented from a housing association. We told the association what had happened, asking for the use of the flat to store possessions for a few weeks, and of course we would maintain the rent. We were flatly told we had to clear the flat within two weeks. (Well I suppose with a long queue of people waiting for a house, the association was serving its social and moral duty.)

Fortunately he had little more than essential possessions and furnishings. The family got together, hired a van and cleared the flat within a day, within the allotted two-week's notice.

Bucket clutter
It will not be so easy for everyone. I know of elderly people whose homes are stuffed with all manner of possessions, many inherited but never used or likely to be used. "Bucket clutter", I call it. Sometimes the only resort is to call in a house-clearance company. It can be heartbreaking to see lovely things being removed, most of which will be simply dumped, but that is sometimes the harsh reality.

My mother sensibly saw the need to reduce her possessions in the latter days of her life at home and gave away a great deal of stuff she no longer had use of. Even so, when she moved to a care home, the clearance of her house took quite a while, though at least we were not under time pressure.

But guess who has acquired some bucket clutter!