Over the years equity release has had a stigma attached to it with people often thinking it is a way that lenders are taking advantage of those over 55. However with the fine tuning of the regulation of mortgages in general, and even more so for vulnerable customers, people can feel more protected by the financial services industry when applying for equity release.
The equity release mortgage product we typically advise on are called lifetime mortgages. These products allow you to release some of the monies tied up in your property with a mortgage which has a term of your lifetime (repayable on death or entering long term care), with the option to either roll up the interest or pay interest only mortgage payments (keeping the mortgage balance the same). A big concern for many when they opt for a roll up mortgage is how much interest is going to be accrued over their lifetime due to compound interest and whether there will be any monies left for your beneficiaries. However you can opt for inheritance protection which can safeguard a proportion of the money in your property.
So why would someone apply for a lifetime mortgage? One of the main reasons is to pay off an existing mortgage or other outstanding debts so that you can afford to live better in retirement, by reducing your regular outgoings. Or perhaps you wish to fund home improvements or a large purchase such as a new car. Maybe you just want to enjoy the funds tied up in your home, and go on some nice holidays.
Other reasons that come up fairly often are people wanting to help family members out either in times of hardship such as an expensive divorce or to help children or grandchildren with a deposit for getting on the property ladder. Often these family members would be eventually benefiting from the monies anyway through inheritance, but equity release can give you the ability to gift these monies in your lifetime.
It is very important to seek independent financial and legal advice before entering into any type of equity release arrangement.
Sammy McCann BSc(Hons), Cert CII(MP)
5th August 2019