Equity Release or Lifetime Mortgage. Which is best?

Answer 1

Neither = you are better off asking your kids if they would like to buy your house off you now ... this way the kids end up with the house (which could be worth a LOT more when you die) .. instead of the Equity Release merchants (who 'fix' the value when you take out the equity)..

Most of these schemes are extremely poor value for money and end up 'stealing' your kids inheritance ..

One example I saw would pay an 80 year old 2/3rds the value of their house (today) and let them live in it for life. So in effect they get a house for 66% of it's market value ...

If the 80 year old died tomorrow they make 50% profit .. if the 80 year old died in 10 years, when the house could be worth double, they make 'only' 303% (i.e. 30% a year) .. if the 80 year old managed to hang on untill 100 & the house is worth 'double double' (400%) they still make the same 30% a year ......

If you are younger (likley to live longer) they pay much less (I've seen down to about 1/3rd at 60)

Of course they are taking a risk that the house value goes up 'as usual' ..

Answer 2

These are very similar products and choosing between two depends on the terms you can negotiate while originating the loan. There are various terms for product like these, one of the most common terms is "Reverse Mortgage". The most common type of Reverse Mortgage is Home Equity Conversion Mortgage (HECM), it is insured by government and is most uniformly available.

If you are living in States like California usually HECM is not a good idea because it being capped at 300K, for that scenario I will try different customized products available with various banks like Bank of America, Wells Fargo, Country wide, etc../

Answer 3

I would stick to lifetime mortgage because with equity release your paying more over the term on a lower amount of money and if you loose your job you loose your house if payments not paid.