From here:
13% leap in releasing equity to repay mortgage
The number of homeowners releasing equity from their property in order to repay a mortgage increased 13% in 2010, new research has shown.
Home reversion provider, Bridgewater Equity Release found that 43% of people used equity release schemes to pay off their mortgage in 2010, compared to 30% in 2009.
So What Will Be Done About The Officer?
1 hour ago
8 comments:
Ha!
Does this really mean what I think it means?
If it does, is that not ridiculously stupid, beyond even the day Gordon Brown's parents decided to procreate!
In other news...
People with renal failure are donating their one operational kidney to themselves.
Enterprising home owners are fighting the recession by building extensions from materials they have salvaged from the rest of their houses. "It suddenly occurred to me that I only need every other brick, and every other floorboard in my existing house. Once I had removed them, I found I had enough material to build that extension I'd always wanted"
Finally, we can announce that the second law of thermodynamics has been repealed by the supreme court; who have decided that perpetual motion would solve all our energy problems. Four way extension cables with the plug pre-inserted into one of the four sockets are planned for release to the market in Q2.
Ok thanks for that little tongue in cheek summary there OP.
So it does in fact mean exactly what I think it means which by extension is evidence of the imputed rent benefit gained by home-owners.
is that not ridiculously stupid
Well, yes, from an philosophical / accounting standpoint it certainly is, but what these people are doing is foregoing the future value of the equity. They repay the debts they're having trouble servicing (usually after retiring, still owing a bundle on credit cards or loans) and exchange it for a loan which has no monthly repayments, which rolls up until "the house is no longer their principal residence" (death, care, etc) - and is then sold to repay the loan and accrued interest.
So month to month their liquidity's improved, if you like, but at the cost of seeing the value of the house used to pay for it.
In fact, the company mentioned only offers Home Reversion - where you sell the house to the "lender" for cash now plus the right to occupy it for life or until you go into care. The (today) sale price is heavily discounted to reflect the compounded roll-up of "interest".
It's a perfect example of the lunacy of inflated house prices and how it's not necessarily really wealth at all.
I enjoyed the bit about "becoming debt-free" - which of course is true if you're selling the house for a knockdown price.
FT, you had me worried there, but as a matter of fact B.E.R. offer the discounted sale option AND the lifetime mortgage option (my post assumes that people choose the latter option), so let's call it a score draw this time.
Mark, hadn't realised they did the loan option as well as HR. Loan option will offer less money against the value of the house. I'm very willing to accept a score-draw but would point out (in hushed and respectful tones, obviously!) that specifying that the lucky punter is "debt-free" afterwards does kinda narrow the angles slightly....... ;-)
Perhaps it's all to do with making them feel better.
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