"equity release": Know anything about it, anyone?

Tags: Home Renovation, Financial Options
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I'm considering what's called "equity release" here in Oz (it may go by some other title in other countries) as a means of funding house repairs/improvements/renovations to my little house.
It works like this: effectively the bank (or body associated with the bank) "lends" you the amount you need. So if, say , I borrow 25% of the value of my home, then 25% of the value of my property at the time of my ..um .. death is retrieved by the company. So effectively the company supplying the finance has bought 25% of my property.
I have been looking for alternatives to taking out a reverse mortgage, which does not appeal to me at all. I'm also not at all keen about taking out a second mortgage to finance the work. (Oh & I fully own my home.)

So if anyone has any insight into the pros & cons, via experience or knowledge, I'd be very interested to hear what you have to say. Early days for me with this idea.

Thanks,
Olga

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@msolga,

I guess, at this very early stage of investigating the scheme, my main concern is: what if the company goes belly up? Fails, in other words. What would my liabilities be in that case? Obviously I'd need some very good legal advice on such a possibility. (Though it is a "reputable" company.)

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Roger said:

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Don't know a thing about it, but you should really find out what happens if the value of the home declines. Is it possible you might have to put up additional equity as a result?

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@msolga,

Roger

My understanding is that (using the example of a 25% loan on the current value of the property I own) that the lender will then be entitled to 25% of the value of the property at the time of "redemption". (ie my demise!)

So obviously the company involved is being super-choosey about which applicants for such a loan they are willing to oblige! In other words, to get this loan, you need to be in a situation where the increased value of your property, over time, is pretty much a certainty. I think I'm in that situation, but they've made it clear that nothing happens until they've done thorough research into this potential investment, including an inspection of the property.

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@msolga,

I hope I'm making sense here. "Financial language" is not my forte.

Btw this scheme was suggested to me (at a meeting, specifically for the purpose of my seeking advice) by my bank manager, who is not exactly allowed to suggest wildly speculative or risky things to his clients! Wink

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