An increasing number of older people are considering dipping into the value stored in their homes to help with the UK’s cost of living crisis.
Some want cash to upgrade their boiler or install solar panels for more cost-effective energy, whilst others are wondering how they can help family members, or themselves struggling with rising prices.
The most common equity release deals are mortgage-based products that are loans secured against your home. Typically, there are no monthly repayments – the loan, including the built-up interest, is repaid from the sale of the property when you die or go into long-term care. These are known as lifetime mortgages.
We have been helping homeowners take out lifetime mortgages on their homes to release cash for a wide variety of needs. To help our family, to improve their homes and to pay off debt are some of the most popular reasons.
Stephen Lowe at the retirement specialist firm Just Group says during the past year more people have been considering using housing equity to help their families.
“Often this is to help them get on to the housing ladder or move to a bigger property, but we’ve started to see the resilience of household balance sheets coming under pressure, and parents exploring how they might help their children and grandchildren,” he said. Years of house price growth mean that millions of older people have seen their property rise in value sharply. Equity release is available to over-55s and allows homeowners to borrow a lump sum or regular smaller amounts against the value of their home from specialist lenders, without having to sell up or downsize.
With many lifetime mortgages you can make repayments if you wish, and it is probably a good idea to do that if you can. We offer full monthly interest payments, reduced or You can even have the ability to make partial repayments without penalty (subject to the lenders Term & Conditions).
These products are increasingly being seen by many as a way of giving family members their inheritance early, at a time when they most need it. A record number of new equity release plans were taken out between July and September 2022 – almost 13,500 – with new customer numbers increasing by a third year on year, according to the trade body the Equity Release Council.
Total lending has risen by 40% since 2021, and the average person now borrows £133,770 (that is for lump sum lifetime mortgages).
Products offered by Equity Release Council members, of which are members, have a “no negative equity guarantee”, which means your estate will never owe more than the value of your property. There are also ways to keep costs down.
Many deals allow you to pay off some of the capital of your loan, or the interest, so the cost does not compound as much. While most loans have early repayment charges, some disappear after about 10 years, but it can be as little as five, according to Will Hale, the chief executive of Key, the UK’s largest later-life lending adviser. The most flexible deals are those that include a feature called drawdown, where you take out smaller sums when needed, with a reserve to call on if you need it in future.
You will pay less this way because you only accrue interest on the money you have released.
With interest rates increasing, lifetime mortgages have increased in cost and may not always be the best solution. At Viva Retirement Solutions, we will visit you in the comfort of your own home and advise you whether releasing equity is right for you. Contact us today to book your appointment.