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Equity release - non-standard construction

Discussion in 'Legal and financial issues' started by arielsmelody, Jan 13, 2016.

  1. arielsmelody

    arielsmelody Registered User

    Jul 16, 2015
    502
    Hi! My MIL is determined to stay in her home but she has no savings so we are thinking about whether equity release is an option.

    I am worried because she lives in a little bungalow with non-standard construction but in a desirable area, so it would be difficult to mortgage but would be very attractive to a cash buyer. We had a couple of estate agent valuations but they are wildly different (£150K difference).

    I wondered if anyone had any experience of the process of valuing a house for equity release, and in particular where the house was non-standard construction?
     
  2. nitram

    nitram Registered User

    Apr 6, 2011
    16,368
    Male
    North Manchester
    Equity release firms are very strict on the condition and structure of the property, you may find that if you tell them the construction details they will not even consider it.

    If there are similar properties in the area you can find out historic details the prices any were actually sold for.
    http://houseprices.landregistry.gov.uk/sold-prices
    Don't expect anything like these values for equity release.
     
  3. Katrine

    Katrine Registered User

    Jan 20, 2011
    2,785
    England
    We are currently setting up an equity release arrangement for my mum. Her house is considered by most insurance companies to be of non-standard construction, although in this part of the world it is the standard for new houses (timber frame). Only one national insurance company will provide her with house insurance.

    For equity release, you can but ask, and then you know where you stand. I thought it would be a problem, but it has not been so. It must depend also on the age and physical condition of the property, and whether known remedial works would bring such a property up to mortgageable standard.

    We went through a national equity release mortgage broker. Contact was by phone, not by anyone coming to the house. This broker is independent, although they get a fee for selling you a product. It is a standard rate of fee so they have no reason to recommend one financial provider over another. They discuss your requirements and circumstances and recommend the best products for you. There is no fee to pay until you go ahead with a mortgage.

    The product we are buying is called a Lifetime Drawdown Mortgage. We are borrowing £10K to open the account. Then after 12 months we can draw down sums as needed, to supplement my mum's pension income. We would be able to draw down a total sum of about 50% of the value of my mum's property. You yourselves might want more money sooner, or just a lump sum. The advisor will work with your specific requirements.

    PM me if you would like the contact details for the equity release mortgage broker that we have used.
     
  4. arielsmelody

    arielsmelody Registered User

    Jul 16, 2015
    502
    Thank you for your replies! We're holding off for now, because it really would be the last resort - if only she would agree to go into a home, we could sell the house and we would have enough money available to make sure we can find her a nice place to live.
     
  5. beajay

    beajay Registered User

    Sep 7, 2017
    1
    brokers' details please Katrine

    :) Hi Katrine,I'm new to forums,so please forgive my mistakes. We are joint owners of a timber framed bungalow and want to do equity release soon Please could you give me your brokers' details?Thanks Beajay
     
  6. reedysue

    reedysue Registered User

    Nov 4, 2014
    4,486
    Scotland
    We own a house with a structural timber frame but have never had a problem getting insurance, when given this information they ask if it has brick or stone walls and a tiled roof and when told yes they consider it to be of standard construction.
     
  7. Kevinl

    Kevinl Registered User

    Aug 24, 2013
    4,555
    Salford
    Interesting, but I was told a house I looked at would be a problem to insure as it was "structural timber frame" so the timber is the structure and the bricks could be classed as cladding. In a "Timber Frame" without the "structural" the outer house structure is built from bricks and the timber is the internal layer and so not structural as such i.e. if you took out the timber the house would still stand up.
    So "timber frame" like Katrine's house and "structural timber framed" aren't the same thing necessarily, you may find out if you ever make a claim, luckily most of us don't so we never really know.
    K
     
  8. reedysue

    reedysue Registered User

    Nov 4, 2014
    4,486
    Scotland
    Each time I have insured the house I have made sure that they understand that it is a structural timber frame with concrete block outer walls and a tiled roof. Most of the new houses in this area are built in the same way.
     
  9. Katrine

    Katrine Registered User

    Jan 20, 2011
    2,785
    England
    #9 Katrine, Sep 8, 2017
    Last edited: Sep 8, 2017
    Yes my mum's house in Scotland is similar, built 15 years ago. Most new houses in her area are built this way. I've seen them going up. Concrete raft foundation. Then low height blockwork walls with the timber framed house sitting on these. There is a hatch in each floor to give access to the crawl space under the house. This is just the open space of the concrete raft, intersected by some blockwork supporting walls for the floor joists. Each external door in to the house is up a couple of steps because the whole house is raised up off the ground to ensure good ventilation. The outside is clad with concrete pebble dashed panels (aka harling), which are bolted to the house frame. Then the roof has concrete tiles.

    I have explained all this to the insurers who say that it complies with their rules about materials. I use LV. They may not be the cheapest, but they're the only ones that would insure my mum's house. They were also very efficient when I had to make 2 separate claims. They didn't increase the premiums afterwards either, other than the expected small annual increase.

    Beajay, I will PM you (private message). Not all lenders were willing to offer a mortgage on my mum's property but the brokers were able to get comparisons. We chose the company that was offering the most flexible package for our needs. We don't want to draw down until we need a lump sum, which we do about every 3 months. The less you draw down, the lower the accrued interest. Each lump sum has it's interest rate pegged, so it won't get raised in future. However, a future draw down lump sum might have a higher interest rate. It just depends on the markets.
     
  10. Selinacroft

    Selinacroft Registered User

    Oct 10, 2015
    936
    Excuse my scepticism but why would anyone contemplate equity release? If it is for care costs, isn't it more straight forward to let the LA deal with it and if necessary put a deferred charge on the house. Why let the agent offereing the equity scheme make a killing out of your house?
    As I say - apologies but can't see why anyone thinks equity release is financially a good plan?
     
  11. Pete R

    Pete R Registered User

    Jul 26, 2014
    2,046
    Staffs
    The OP's MiL wants to remain in her own home.

    You can only get a DPA if the care is in a Care Home or in some circumstances Assisted Living.

    This thread is over 20 months old!

    :)
     
  12. Katrine

    Katrine Registered User

    Jan 20, 2011
    2,785
    England
    It's not financially a good plan if you want to retain the most funds. It's a choice you have if your savings have run out. My late dad left my mum with around £450K in savings, and £19K a year in widow's pensions; enough for any foreseeable rainy day you would have thought. She also has her state pension, higher rate AA, full CT exemption, and Direct Payments from the LA to help with her personal care needs.

    Katrine's mum is rich, isn't she? Well not now, after 10 years of paying for live-in carers, plus the eye watering ongoing costs of her legal Guardianship.

    I hear what you're saying Selinacroft. Understandably, most TPers are very anti equity release because of the high interest rates. I would only recommend it to someone who needs funds to stay in their own home. It does not make financial 'sense' but if it is the best welfare interests of the home owner then it's an option, at least to postpone the day when residential care is the only affordable choice.

    The equity release mortgage we have will have given my mum an extra 2-3 years at home, starting a year ago. She's nearly 93 and has been looked after at home for 10 years. However, she may still outlast her funds. The mortgage only pays out up to 45% of the property value. If we then need to sell the house we would expect about 45% of its value to become available to her to pay for residential fees, combined with a healthy pension income.
     
  13. Selinacroft

    Selinacroft Registered User

    Oct 10, 2015
    936
    Thank you both - not sure how I picked up such an old thread:confused:

    I can see for those wishing to stay at home, it gives you the income to choose your care supplier rather than taking what the LA offer which may not be the best, and also income to pay the bills.

    It's just a personal thing, but I always shudder when those adverts come on and see a happy elderly couple signing away their house.......
     
  14. Katrine

    Katrine Registered User

    Jan 20, 2011
    2,785
    England
    I'm not sure it is a good idea for couples. I would worry about the long-term financial health of both partners who co-own the property. If equity release is being considered to pay for care costs then (if the couple are over 60) the property should be disregarded in a LA care funding assessment. The couple should not have to sell up or take out a mortgage to pay for care costs. However, it all depends on circumstances. A property in the South East of England could be worth a fortune, while the owners are on very modest incomes. In that situation equity release can make sense if it will help improve the housekeeping budget. Not to go on cruises, like those couples in the adverts!
     
  15. Pete R

    Pete R Registered User

    Jul 26, 2014
    2,046
    Staffs
    If they are a couple they do not have to be over 60.

    The over 60 rule applies to any other qualifying relative.

    :)
     
  16. Alain

    Alain Registered User

    Sep 17, 2017
    2
    #16 Alain, Sep 17, 2017
    Last edited: Sep 17, 2017
    Duplicate posting
     
  17. Alain

    Alain Registered User

    Sep 17, 2017
    2

    Hi Katrine
    I am also new to this Forum after searching for Equity Release info. I have just found your posting re the above and would like your brokers details please.
    We have been declined for Equity Release due to timber/steel house.
    Many thanks. Ely from Surrey
     
  18. Katrine

    Katrine Registered User

    Jan 20, 2011
    2,785
    England
    Hi Alain, I've sent you a Private Message.
     
  19. Shedrech

    Shedrech Volunteer Moderator

    Dec 15, 2012
    6,531
    Yorkshire
    #19 Shedrech, Sep 17, 2017
    Last edited: Sep 17, 2017
    hello Alain
    and welcome to TP
    I see Katrine has replied to your post
    I just wanted to reiterate what Katrine said in her earlier post, No 14 on this thread - if you are considering equity release to pay care fees, do have a read of this factsheet first
    https://www.alzheimers.org.uk/download/downloads/id/2268/factsheet_paying_for_care_and_support_in_england.pdf
    the value of a home is not taken into account in the financial assessment as long as the person needing the care and/or their spouse lives there - if the person has other assets over £23250 (just their assets, or half joint assets - their spouse's assets do not form part of any financial assessment), then they will fund any care themselves; below that figure the Local Authority will at least part fund the care - so do ask for an assessment of care needs from the Local Authority Adult Services as it is everyone's right to do this, plus a carer's assessment for the carer - the LA will do a financial assessment after the one for care needs
    best wishes
     
  20. Bealybugs

    Bealybugs New member

    Jul 27, 2018
    1
    #20 Bealybugs, Jul 27, 2018
    Last edited: Jul 27, 2018
    My husband is 77 and I am 71 - We have just applied for Equity Release and have been turned down by all the companies approached because our property is of a timber framed and SIPS construction - even though it is new build by a well-regarded German company. It is a very high value property and we were looking to borrow less than 20% of the valuation provided by two well known reputable estate agencies. Has anyone else had a similar experience?
     

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