Equity release arrangement

Merlin5

Merlin5

Merlin5

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Joined
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Finchley, London
I'm currently, with my brother and sister in law, sorting out my mum's estate including selling her flat. She took out an equity deal a few years ago where she has to give them 50% of the final sale profit when it's sold.

I always thought the deal was that the equity company gave a lump sum of money to her, 50% of the value at the time she bought it.

Apparently not, she's just been receiving monthly amounts. We worked out that over the 5 years or so, she's received money amounting to about a third of the potential sale value and not even close to half of the value when she bought it.

I'm not expecting any optimistic answers, but what happens in the event of death? They've not paid my mum anywhere near 50% and my dear mum is not around anymore. Where do we stand, do we need to get solicitor help ? There's a potential £80 to £90K extra we could get if they didn't get 50%.

Is it a done deal that these sharks get 50% even if a client dies the day after signing the contract?
 
No point asking a forum on this one tbh. Check the terms of the loan agreement and if you don't have them get a copy.

Equity releases are shady **** imo. I've never seen a loan agreement that didn't shock me when looking at the figures. Most will end up taking the full sale proceeds if people live any reasonable amount of time after taking out the equity as the interest is so high.

Seeing as you'll need a solicitor to deal with the sale and pay the loan company anyway, best ask them to take a look!

Hope it works out favourably
 
This is how these things work of course, it's a bit like a pension, if you live a long time, you'll get the most out of it. As the above post these equity release mortgages, or "lifetime" mortgages as they are more commonly known in the industry are shady, I used to underwrite them and I didn't like doing it, but the brokers selling theses things are the kind of people who would rob their own grandmother's to get their proc fees.

Anyway, just ask for a copy of the T&C's of the mortgage, or if your mother had the paperwork give it a read, chances are it's all been signed and agreed.

Good luck.
 
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If you want either scan the T&C's (redacting the personal data) or even better if it's electronic copy and paste and I'll read it for you.

Edit: depending on how long the agreement has been in place it should have KFI (key facts overview) it'll be about hmmmm, up to maybe up to 12 page document that tends to list everything including the mortgage conditions.
 
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Merlin5 said:
I'm currently, with my brother and sister in law, sorting out my mum's estate including selling her flat. She took out an equity deal a few years ago where she has to give them 50% of the final sale profit when it's sold.

I always thought the deal was that the equity company gave a lump sum of money to her, 50% of the value at the time she bought it.

Apparently not, she's just been receiving monthly amounts. We worked out that over the 5 years or so, she's received money amounting to about a third of the potential sale value and not even close to half of the value when she bought it.

I'm not expecting any optimistic answers, but what happens in the event of death? They've not paid my mum anywhere near 50% and my dear mum is not around anymore. Where do we stand, do we need to get solicitor help ? There's a potential £80 to £90K extra we could get if they didn't get 50%.

Is it a done deal that these sharks get 50% even if a client dies the day after signing the contract?
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Sorry to hear about your Mum.

There may be residual capital to pass into the estate, but equally there may not if the lump sum was used to buy a fixed annuity or the like. If you can find the documents or the product name then I'm happy to review if you drop me a trust. The equity release market isn't the Wild West / screw the client like it was in the 1990s with home reversion plans, and the equity release provider should be pretty easy to deal with.
 
Thanks The Abyss and Budforce for your offers to help, much appreciated. At the moment, we've just found a letter from the company regarding the 50/50 deal with some basic details, but we can't find any contract, we think my mum's solicitor will have it. So I'll have to contact the solicitor. It was a steady income stream, not a lump sum. My feeling is that they'll have watertight clauses that allow them to steal take half the sale price. Ah well, whatever is left will be better than a poke in the eye with a blunt stick. :p
 
So basically as it wasn't a lump sum, you could infact sign up to this scheme, get your first month's payment then peg it and the company then get a whole half of the property value? Damn.
 
LeeUK said:
So basically as it wasn't a lump sum, you could infact sign up to this scheme, get your first month's payment then peg it and the company then get a whole half of the property value? Damn.
Click to expand...

Yeah, I reckon so. Complete ripoff.
 
You need to speak to your mum's solicitor.

I am making some assumptions here but it would appear the 50/50 deal has provided some form of annuity. I,e they have taken 50% of the value of the property in perpetuity for giving your mum an income for the rest of her life. So, if you live a long time they work out better. If not they tend to make lots of money for the company you took them out with. People always believe they will live longer than they do so there is always a market for these kinds of products.

What you need to find out is sometimes, the company might offer some value protection guarantee, and you might get some of the percentage back on a sliding scale at least that's I think the best outcome you can possibly hope for, good luck.

Sorry for your loss.
 
Thanks very much for that advice, Slade2. Yes, I'll be speaking to her solicitor probably today or tomorrow. I'll ask about the possibility of any value protection that might allow us to keep a bit more of the proceeds of the flat when it's sold. Looking at it from a glass half full perspective, I'm resigned to getting 50%, and so any improvement will be a bonus. :)
 
The equity release market is the fastest growing residential sector at the moment (within the context of mortgages etc). They are very popular and for some people are a vital source of income in later life. Asset rich and cash poor and all that - many many elderly people are skint but own properties with a load of money owing to rising markets but won’t entertain the idea of selling for many reasons. Hence, equity release effectively makes the properties value work for you - albeit in a questionable manner.

Ethical or not it doesn’t really matter. She signed up to it, the contract is there and no doubt clear and so it must be adhered to. As crap as it no doubt is for the remaining families wallets.
 
fastwunz said:
The equity release market is the fastest growing residential sector at the moment (within the context of mortgages etc). They are very popular and for some people are a vital source of income in later life. Asset rich and cash poor and all that - many many elderly people are skint but own properties with a load of money owing to rising markets but won’t entertain the idea of selling for many reasons. Hence, equity release effectively makes the properties value work for you - albeit in a questionable manner.
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Yeah it's not surprising really. Especially with governments being late to force people to start saving into a pension pot, i guess there will be a lot of people in their 50s+ who don't have a pension pot, or not a sizeable pot that will help them into their 80's/90's. So they end up turning to these kind of schemes.
 
Semple said:
Yeah it's not surprising really. Especially with governments being late to force people to start saving into a pension pot, i guess there will be a lot of people in their 50s+ who don't have a pension pot, or not a sizeable pot that will help them into their 80's/90's. So they end up turning to these kind of schemes.
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Its crazy, watched a TV show the other week and there was a guy on there who was a retired photographer who it would appear had a good life and made a lot of money as a tabloid photographer and had lots of pictures with a few famous people. Obviously made a few quid over the years but at 65 he was working as a taxi driver in London and working long hours to be able to pay his rent on his modest property for him and his wife. He talked about worrying about retiring because his pension would never be enough to pay his rent so he was forced to keep working. Personally I have friends that are banking on large chunks of inheritance to get them out of trouble.... I think I`m fortunate that both me and the wife have decent local government pensions and have a fair few years paid into them as well. I am not banking on any inheritance from anyone and would rather my parents and in laws enjoyed the fruits of there labour while they are still alive, and for some people equity release give some people some extra money to enjoy a hopefully lengthy retirement.

Merlin5, if you dont mind sharing how did you get on with the solicitors?
 
Sorru to hear about your loss. I mean, you cant expect them to just get the money back they lent her, they should get more, effectively she got a loan where they took a significant risk that she may live a long time. You wouldnt be happy to loan someone £100 for a few years and then only get back £100.
 
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