By Richard Rutherford, Mortgage Manager, Richmond Mortgage Advice Centre
Did you know that you can’t see the Great Wall of China from space, Napoleon wasn’t short and Vikings never had horns attached to their helmets?
These are just a few of the many myths that have evolved over time. Similarly, if you opt for an Equity Release plan there isn’t the possibility that this may result in you losing your home (if it remains your main residence), nor will it leave any debt to your children.
This is the case if you opt for a lender that’s a member of the Equity Release Council (the industry body), which covers the vast majority of all new loans. The Council has a number of rules in place, such as the ones above to reassure borrowers that they’re protected.
What is Equity Release?
If you are not too familiar with this product, it’s simply another form of borrowing for the 55+ homeowners, that enables them to stay in their home. It’s also increasingly viewed as another element of the retirement planning process.
With equity release, some of the value in your home is released in order to raise funds. You can then use that money for whatever reason you like, such as:
– help to clear an outstanding mortgage.
– enable much-needed home improvements.
– settle debts.
– assist with regular bills.
– gift money to family and friends.
– or, perhaps, simply use it to treat yourself.
In short, with the average 65 year-old UK adult having around 20 years of retirement ahead of them, the extra funds will hopefully assist the journey through this period.
How it works
With the most popular product – a Lifetime Mortgage – you can raise funds (up to agreed limits), and not even have to pay off any capital or interest at any point during your lifetime, if that’s the route which best suits you.
The provider of the loan would reclaim the capital (and any accumulated interest) through the sale of the property, once the final planholder dies or moves into long-term care.
Of course, it may not be the best route for everyone, and other options do exist (such as downsizing), but equity release has become increasingly popular as the post-it note on this page shows. However, this shouldn’t be a surprise, as the old world view that retirement income will be largely based on pensions possibly doesn’t hold true anymore.
You may also be surprised to hear how big this marketplace could be. If we consider the equity held in property owned by the 65+s alone, this amounts to a massive
£1.1 trillion* – which almost equates to the total amount of all outstanding mortgage lending in the UK!**
Get in touch with our mortgage team if you have any questions about Equity Release .
(Sources: *Key Retirement, March 2017 release; **Council of Mortgage Lenders, April 2017 release)