Equity release is a hot topic. No longer a ‘last resort’ option considered only by a small number – it now represents almost a third of later life borrowing. A record £2.15 billion was unlocked in 2016. Measured by the value of lending, the market has almost trebled in size in the last five years[1].
An adviser recently confided in me that his peer had once ‘turned their nose up’ at mention of equity release. It had taken some persuasion that her wealthy clients could ever be in the market for such a product. As a convert himself (one of many driving an explosion of growth in the market) he is surprised at the lack of awareness of how far these products have come since their once “grubby” old image.
Equity Release Council
Increased regulation by the Equity Release Council means that products are more customer-friendly than ever before and offer increased protection for homeowners. However, some myths remain. In 2015 the Financial Conduct Authority (FCA) suggested that equity release - once “a dirty word” - still had problems with its public image[2]. There is clearly still some ‘myth-busting’ to be done.
The Lifetime Mortgage facts include:
With a lifetime mortgage (equity release), you could release some of the equity that’s tied up in your home – tax free;
It creates a debt against your home. The loan is repaid when the last property owner dies or moves out of the home into long-term care;
You retain retain ownership of your property;
Interest is added to the amount owed each month, so interest is charged on the loan plus any interest already added. This means the amount owed grows reducing the equity in the property and the value of any inheritance;
Inheritance protection and negative equity protection offer further security for homeowners and their beneficiaries;
The advantage compared with a residential mortgage or traditional loan is that there are no monthly payments.
It’s not right for everyone but for some it can offer an ideal solution to their retirement cash needs. Oh, and wealthy people do it too. For some, it makes good financial sense.
Contact Flexible Lifestyle today to discuss later life lending and what it can do for your lifestyle.
Source data:
[1] Equity Release Council Market Report Spring 2017.
[2] Financial Reporter April 2015, noted that at an FCA Mortgage Conference, Christopher Woolard, Director of Strategy and Competition, admitted that “in the not too distant past, equity release became a dirty word”.
Equity release may impact the size of your estate and it could affect your entitlement to current and future means-tested benefits.