WHY CONSIDER EQUITY RELEASE?

June Blog 2024

Welcome back to our series of blogs dedicated to navigating the world of property finance in later life. In this edition, we aim to provide comprehensive guidance on how to get started, including eligibility checks, expert advice, understanding mortgage options, and reviewing financial considerations.

Why Consider Equity Release?

Many individuals consider equity release, such as lifetime mortgages, for several reasons. For some, it is a means of raising finance to supplement retirement income or fund essential expenses. Others may use it to pay off existing interest-only mortgages, providing peace of mind and financial stability in later life.

Getting Started with Later Life Mortgages

1	Eligibility Check	Before exploring mortgage options, it is essential to ensure you meet the eligibility criteria. Typically, individuals aged 55 or over are eligible, with some providers offering flexibility on age limits. Additionally, the type of property and construction must be suitable for the lender's criteria. Properties in areas prone to flooding may impact lending decisions.
2	Seek Independent Expert Advice	Consulting with an independent mortgage adviser specialising in later life mortgages is crucial. They will assess your unique circumstances, discuss your financial goals, and recommend the most suitable mortgage options tailored to your needs. An independent adviser should be able to access all lenders in the marketplace, ensuring you have access to the widest range of options.
3	Understanding Lifetime Mortgages	A lifetime mortgage allows homeowners to release tax-free cash without selling their property. It is essential to understand how lifetime mortgages work, including repayment options and the impact on inheritance.
4	Exploring Options	Your adviser will present various mortgage options based on your financial situation and objectives. This may include lifetime mortgages, Retirement Interest Only loans, or traditional residential mortgages.
5	Equity Release Council Standards	Opt for products approved by the Equity Release Council, offering better consumer protection. These products ensure fixed or capped interest rates, lifetime occupancy rights, and a "no negative equity guarantee." Seek advisers who are members of the Equity Release Council for added peace of mind.
6	Legal Advice	Before finalising any mortgage agreements, you should always seek independent legal advice. Your solicitor will explain the terms and conditions of the contract, ensuring you understand your rights and obligations.
7	Additional Costs	Be prepared for associated costs such as advice fees, arrangement fees, legal fees, and valuation fees. Your adviser should disclose all applicable fees upfront to avoid surprises.
8	Estate Planning	Involve family members in discussions about mortgage arrangements and estate planning. Get a will if you do not have one or review your current arrangements if you do. Seek legal advice to understand the implications of your decisions on inheritance and will arrangements.
9	Means-Tested Benefits	Understand how borrowing arrangements may impact means-tested state benefits. Seek guidance from relevant authorities or advisory services for clarity on eligibility.
10	Reviewing Income and Expenditure	Assessing affordability is crucial, especially when it comes to servicing interest on a later life mortgage. Reviewing income sources and expenditure patterns helps determine whether you can comfortably meet repayment obligations.

Understanding the Pros and Cons

Is equity release the right solution for you, or could there be a better alternative? It is essential to weigh the pros and cons before deciding:

PROs	CONs
Provides a lump sum or regular income without the need to sell your home Flexibility to use the released funds for various purposes, such as home improvements, debt repayment, or supplementing retirement income No monthly repayments required, reducing immediate financial strain	Interest accumulates over time, potentially reducing the inheritance left for beneficiaries Impact on means-tested benefits or entitlements Lifetime mortgages may have higher interest rates compared to traditional mortgages

Conclusion

Obtaining a later life mortgage is a significant financial decision that requires careful consideration and expert guidance. By understanding your options, seeking professional advice, and reviewing your financial situation, you can make informed choices that align with your long-term goals and aspirations.

Stay tuned for our next instalment, where we will continue to explore the ins and outs of lifetime mortgages and how they could benefit you.

Remember, when considering your financial options in later life, always seek independent advice to ensure you make the best decision for your circumstances.

If you have any questions or concerns, feel free to reach out to us – we are here to help you every step of the way.

Until next time, 

Iain