Due to the extensive range of uses that the funds are put to, the customers for Equity Release are wide-ranging and varied.
However, the common issue for all is that the UK has an ageing population, which will simply increase the financial pressures on the State, and accelerate the need for those nearing, or in retirement, to take action. For example, let’s look at the trends for those aged 65+ in the UK:
■ Back in 1991, this amounted to 9.1m (15.8% of the population).
■ In 2016, it had increased to 11.8m (18% of the population).
■ By 2041, it’s projected to be 20.4m (26% of the population)!
(Source: Office for National Statistics, Living Longer survey, August 2018)
The Equity Release borrowers
To illustrate how wide-ranging the borrowers can be, some are coming to the end of their interest-only mortgage term, and want to remain in their home, but don’t have the money in place to pay off the mortgage. Others require the funds to modify the home for health and mobility reasons, and may also want to cover the cost of ‘at-home’ care. Equity release could help in both cases.
Whatever you require the money for, drawdown is the most popular route. This is where you take an initial amount and then have the option to drawdown further amounts down the line. Lump Sum relates to taking the full amount at the outset.
Some lenders now offer this
■ A similar product to Equity Release applies to both Buy-to-Let properties and Second Homes, in most parts of the UK.
■ Instead of securing lump sum amounts, you could opt to receive regular monthly payments. Amongst other benefits, these options could overcome inheritance concerns about the main home, with regard to the former, and help to lessen the roll-up effect with the latter. Please get in touch to find out more.
Equity Release may be the best solution, but you should consider other options. This might replace the need for an Equity Release plan, or perhaps reduce the size of the plan required.
Downsize your home
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. Of course, you’d need to consider both the emotional attachment you (and your family) have with your current home, plus the cost of moving, which sits at a UK-wide average rate of around £9,000. (Source: comparemymove.com, October 2018)
Borrowing from family members
This is an avenue that you should consider.
Other borrowing options
Lenders recognise that we have an ageing population and are starting to provide different mortgage options for those entering, or who may already be in, their retirement years. These increasing options are good news. The downside is that you’ll probably need to meet the affordability criteria to show that you can pay either the monthly interest, or the interest plus capital repayments.
Existing or potential State Benefits and Local Authority Grants
If you’re already claiming benefits, and some of those 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.
Consider taking in a lodger
If you don’t have an issue with someone else living in your home, then this could be a revenue source.
Look at your existing pensions, investments and savings portfolios
You’ll need to take professional advice to decide if securing money this way is a better option. Also, across your lifetime, there’s a good chance that you may have forgotten about a long-held investment, or a small pension from a past employer. You can talk to us, or take a look at the useful links on the last page.