- Personal Finance
Equity Release - release the money in your property
The interest-only mortgage timebomb
This article, although highlighting a number of areas where equity release (release cash from the value of your property) is generally used, it will primarily be used to highlight the huge 'ticking timebomb' that people with interest-only mortgages, coming to the end of the lending term, with a shortfall in their repayment vehicle (mainly endowments) ot nothing at all in place to pay the lender the amount due.
Equity Release (ER) is the answer for many people. Most lenders won't lend to people over a certain age - so a remortgage of a property to raise the amount needed to pay the original mortgage at the agreed date is not an option. Later Life Lending (equity release) is.
The modern ER plans are very flexible (compared to 10 years ago, say) and a number of prestigious lenders now offer them. They offer the facility to repay the amount released - or not, if you prefer. The language used has been simplified and, by being regulated by the Financial Conduct Authority (FCA) they have to be completely transparent and off gthe righht solution for each individual need.
Below I list some of the most common uses of ER - you'll see, because the main aim of this article is to offer guidance to those with soon-to-mature interest-only mortgages and nothing - or not enough - in place to repay their mortgage to the lender (it's estimated that more than 3m people have interest-only mortgages) I have put this use at the top of the list.
Common uses of Equity Release:
- Repayment of an interest-only mortgage, where no repayment vehicle is in place.
- A tax-free lump sum for a private private medical care, to avoid a lengthy waiting list.
- Help a family member to buy their first home.
- Help finance a move to a new property.
- Replacement of family car/home improvements/similar uses.
- Supplement retirement income.
- Reduce the value of your estate and save on Inheritance Tax.
- Enjoy your money while you're alive.
- Actually go on that adventure that you've always dreamed of.
- Purely to have the money to spend as you want, when you want.
When considering ER there are a number of things you really should consider, the first is ensuring that whoever is providing the advice is fully regulated by the FCA and that they are Whole of Market (WoM) advisrs, looking at the widest range of ER providers - if they are not WoM then you are not having all options explored for you. Some other qualities tyour adviser should have are:
- Will they offer an initial meeting/discussion either by telephone or face to face without obligation and without charge?
- They should, initially, explore whether equity release is a suitable route for you now or possibly later.
- They should fully explain in full how equity release works and its impact on you & others.
- They should look at and discuss all alternatives and provide access to these options if needed.
- Their recommendation has to be based solely on your needs.
- If, after they have fully explored your options, the recommended route is to proceed with an arrangement, then they should present you with with a Key Facts Illustration (a client specific illustration).
- If you are fully happy to proceed, they should help you with the application process.
- When an application is completed, they shpuld provide you with a suitability letter that will fully explain why the particular Equity Release product has been chosen for you.
Finding the right Equity Release adviser
Independent - or Whole of Market - advice is the key here. You want only to deal with experienced equity release advisers. Soe mortgage advisers will advice primarily on residential mortgages/remortgages with equity release as a 'sideline', something they don't specialise in but will provide advice on if a case lands on their desk. This isn't really good enough.
Equity release is a specialised form of lending and requires a mortgage adviser to have an extra (on top of his mortgage-related qualifications) qualification, that's why a great many mortgage advisers don't want to take their focus off their main profession - residential mortgages.
There are dedicated, Whole of Market, equity release advisers to be found - you want to do a little checking on them before committing to an adviser. Look at their qualifications, look for customer feedback (reviews), look at their website - is it professional looking (I know this isn't everything but it can certainly provide a feel for the firm), do they offer a professional free guide to Equity Release? Do they have an accurate - and easy-to-use calculator on their website.
These are a few of the factors you should consider before committing (trusting?) an adviser to act for you.
Tthe interest-only ticking timebomb
The HubPages viewers opinion
We'd really like to know what your thoughts are on this, for many, stressful set of affairs. So many people, many of them moving into older age (over 55), with a mortgage that must be repaid to their lender and not enough (nothing at all in some cases) in place with which to repay the outstanding mortgage. Equity Release - freeing up cash from their home - is a more and more viable solution. So many people are equity-rich (the value of their home) and cash-poor.