You’re free to do whatever you like with the funds raised through Equity Release, which is why it appeals to such a wide range of people.
At the two ends of the spectrum is the impact of interest-only mortgages and care needs. For the former, there were 1.9m interest-only mortgage loans still in play at the end of 2016, accounting for 21% of all home-owner mortgages.* If payment vehicles aren’t able to fully cover the cost of the mortgage at the end of the loan term, then one option may be to raise funds through an equity release plan.
With regard to care needs, many may feel that they would ideally prefer to remain in their own home, plus avoid the sizeable care home costs (in the realms of £31,000-£44,000 per annum**) – unless you qualify for an element of means-tested support.
Conversely, at-home care, may be at a more manageable £11,000 a year for 14 hours a week, and this is where an equity release plan could help. Although do balance this against any means-tested state benefits, and threshold plans for care funding.
In between these two needs, there are a whole host of reasons why you may want to raise funds via equity release – pay bills, settle debts, home improvements, upsizing your home, gifting money to family and friends, holiday of a lifetime, and so on – hence the wide range of clients.
(Sources: *Council of Mortgage Lenders, May 2017 release, **LaingBuisson, May 2017)
Equity Release borrowers
Broadly, research shows that they fall into the following categories:
(Source: Equity Release Council, Spring 2018 Market Report, 2nd Half 2017 data)
Equity Release can be the best solution for some, but you must consider the alternatives. This may replace the need for an equity release plan, or perhaps reduce the size of it.
Downsizing your home
Of course, there’s both the emotional attachment you have with your current home, plus the cost of moving, which is around £11,000.* However, this offers a relatively easy way to raise the funds you need now – with the option to take up equity release at a later date, if wanted.
Consider taking in a lodger
If you don’t have an issue with someone else living in your home, then this too could be a solution.
Existing or potential State Benefits and Local Authority Grants
If you’re already claiming benefits, and some are means-tested, then raising funds may affect your ability to continue to claim (or reduce the regular payments). Additionally, there may be some benefits that you should be claiming for, but are not aware of.
Look at your existing investments and savings portfolio
You’ll need to take professional advice to decide if securing money this way is a better option.
(Source: *Lloyds Bank, September 2016)
Peace of Mind for YOU
If you opt to borrow via a lender that’s a member of the Equity Release Council (ie. most of them), then a number of controls are already in place to protect you, such as:
■ All products from Equity Release Council members have a guaranteed security of tenure, so customers will be allowed to remain in their property for life, or until they move into long-term care, provided that the property continues to be their main residence. In the case of a joint policy, this then applies to the last surviving borrower.
■ Plans from Equity Release Council members have a ‘no negative equity’ guarantee. This means that regardless of the value of the home or how long the customer lives, they will never owe more than the value of their home and no debt will ever be left to the estate.
■ Customers have the right to move, although they may have to repay part of a lifetime mortgage loan if moving to a cheaper property.