Equity Release Scheme

[Carole]

I understand that France is just introducting Equity Release Schemes. Does anyone know if they are now in operation and how do they work over here.

Thanks

Carole

[Gluestick]

An Equity Release Scheme is only a disguised form of annuity, Carol.

Ask any UK self-employed business person who has been compelled (by law) to convert their pension fund into an annuity whether they think the deal is fair and good.

 

 

[Carole]

Thanks Gluestick, I thought, in my ignorance, it was possible to receive a lump sum which could be used for house repairs etc. That is what the companies often imply. Shame, I could do with a new shower!!

Have a good day

Carole

[Baz]

[quote user="Gluestick"]

An Equity Release Scheme is only a disguised form of annuity, Carol.

Ask any UK self-employed business person who has been compelled (by law) to convert their pension fund into an annuity whether they think the deal is fair and good.

[/quote]

Gluestick, I feel your comment is misleading. Nobody forces a UK self-employed to take out a pension, also you get  tax relief on all your contribution plus a tax free return of 25% of the fund at retirement. The annuity rates are generally determined by current interest rates and age at retirement, the returns are normally much higher than investment rates and most policies allow you to take your annuity from the provider offering the best annuity rates at the time.

Carole, I do not know the French set up, but I would expect it may be similar to UK schemes. In the UK it produces a lump sum  to use how ever you choose. The older you are the better the terms but you must have professional advice before proceeding. There is a minimum age before you can apply, but if it is a route you wish to follow then IMO you need to be at least 70+. From my point of view and circumstances I would stay clear of these schemes, but they are a way of unlocking money in your property with a guarantee to remain in the home until death.

Baz

[Gluestick]

Sorry, Carol; a bit misleading, my answer!

Whether the equity release client takes an annuity or a cash lump sum, it is still a form of annuity, in the fact that it's a Life Assurance Contract backwards! And that's what I meant.

The financial institution calculates your expected mortality (based on age etc) and then allows you a percentage of the current value of your house. Since it's a lump sum, they then additionally, discount this sum, since you are getting it all up front and not in regular monthly, bi-monthly, quarterly, six monthly of annual payments.

Any specific ill health on a Life Assurance contract would cause the underwriters to significantly load the policy premium!

I have now known these Equity Release schemes to be similarly generous!

The very worst types are/were the deal whereby the institution releases a lump sum as a mortgage on the property: the cash is then used to purchase an annuity: and part of the annuity cashflow is used to pay the mortgage: which tends to be at floating rate not fixed. [Www]

We once fought a case for an estate aginst one of the major UK banks on one of these awful deals. And won. Another story.

There are some totally unscrupulous property companies who will exchange a cash lump sum for a tenancy at will. They work simply on the property appreciating as the market rises (not much more I fear!), and the now tenant dying fairly quickly. For the few who live to over 90  the majority will turn their toes up far earlier!

Stay away from them all.

Baz:

Until the recent (April 2006) changes to pensions law (which of course are as yet still not totally defined), a self employed person had only one choice when they retired: Hobson's!

This and a number of other anomolies was one of the drivers for pension law reform.

Of course the self-employed didn't have to take out a pension. No one is forced to save.

They can go out on a weekly drunk instead!

Perhaps you could try extolling the virtues of these things to the raft of self-employed who had the misfortune of vesting their trust in Equitable Life: and others?

Vanishing pensions and miserly returns on managed investments have been centre stage in Financial Services for quite some time now! Perhaps you've missed the news?

 

 

 

[Logan]

You are all once again basing your replies to this question on your UK life and experience.

The question was equity release in France. Quite different as you should expect.

Currently 'equity release' in France means a first mortgage on your property of  about 40% of the current market value defined by the banks own valuer. In practice they will mark it down 10%-20% to be safe. You repay monthly at a slightly lower than usual interest rate and over years until the age of 70. No loan will be considered over 70 by most French financial institutions I know. However you can borrow up to that age and jointly. Compulsory and expensive insurance will be required, loaded if you have historical health problems.

Recent laws have been passed before Chirac left office which allows banks to do something similar to UK equity release schemes. However to my knowledge no French bank will currently touch it. That is because they see it as a potential dog’s dinner. Napoleonic inheritance laws and the practice of judicial courts in France to historical shaft commercial institutions given any opportunity are the reasons. 

Equity release in France means a repayment mortgage, nothing more.

 

[BJSLIV]

Of course there is always the good old sale by Rente Viagere which is a traditional French  way of releasing capital.

[SC]

[quote user="Gluestick"]

Of course the self-employed didn't have to take out a pension. No one is forced to save.

They can go out on a weekly drunk instead!

[/quote]

Not me, what with all that time working and then counting my money afterwards during my 25 years of UK self-employment (what was left of it after accountants and management consultants had had their share [:)]), the pubs were all shut.

Steve

[Gluestick]

Or, of course there are these.................

http://www.telegraph.co.uk/global/main.jhtml?xml=/global/2004/09/27/shore7.xml&sSheet=/global/2004/09/28/home.html

The core principle is that the mortgage is only repaid from the estate after death: thus it is not a straight repayment mortgage. N.B. Not for Residents.

Or this:

http://www.home.co.uk/guides/news/tmc.htm?9542

 

 

[cooperlola]

From a very amateur and non-professional viewpoint, it has always seemed to me that financial institutions are unlikely to offer anything which benefits your bank balance, rather than theirs.  But it's quite tempting, I can see, - especially if you have no dependents to consider - to use some of the capital you've got invested in your house, to have a good time now rather than leave it to somebody else; I guess that's what they rely on....

[Logan]

There are currently two companies I know of in France who will do an equity release repayment mortgage. Documentation and explanations all done in English. There are probably more.

www.gemoneybank.com 

www.bnpparibas.com

[Gluestick]

[quote user="cooperlola"]From a very amateur and non-professional viewpoint, it has always seemed to me that financial institutions are unlikely to offer anything which benefits your bank balance, rather than theirs.  But it's quite tempting, I can see, - especially if you have no dependents to consider - to use some of the capital you've got invested in your house, to have a good time now rather than leave it to somebody else; I guess that's what they rely on....[/quote]

Rather than Equity Release, JE, the new approach is what has been called "Mortgage for Life", which is similar.

Friends of ours have this. They sold their Surrey pile for a mound and moved into a large appartment in an old manor. When the last of the couple dies that's it. No capital.

However, you should see their villa in Southern Spain...................................

 

 

[makeiteasy]

Dear Carole,

 

yes indeed, equity release scheme with repayment exists in France.You could raise up to 70% of the value of your property subject to fitting to the french lending criteria(ie your expenditures including the new installment are not more than a third of your income).

Recently Credit Foncier has set up an equity release without any repayment, but at the present time it is just available for french native people[:(]The reason they gave is that is it purely because of death rate...!!![8-)]

Hope it will help.