Equity Release

What is equity release?

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Retirement Mortgage, Lifetime Mortgage and Equity Release are all, essentially, a different name for the same thing – a vehicle for raising money when you are retired or approaching retirement and either own your own home or are looking to purchase your own home.

Unlike the schemes of the 1970’s there are now many different structures available. There is a wealth regulation in place for clients’ protection including numerous guarantees which were not in place 40 years ago.

I find that, initially, many of my clients are unsure, worried or sceptical as to exactly how Equity Release may work as much of what they have heard has been negative. I fully accept and agree that many schemes available in the past were not ideal, however I can assure you that there has been so much demand, development and change in recent years that the schemes available now bear no resemblance to those of 40 years ago.

Equity Release can relieve financial pressure and provide for a more comfortable retirement. It is also important to note that depending on the type of scheme taken it is likely that a Lifetime mortgage will reduce the value of your estate for the future. This may have an impact on any inheritance your beneficiaries may be likely to receive. Again, there are many different options to consider and your plans for the future would be discussed and taken into account before I make a recommendation.

I am confident and proud to be able to discuss the range of options available to retired clients today.

I see so many people who are worried about their finances at a time in their lives when they really don’t want financial pressure. Being able to take those worries away is tremendously rewarding and I feel privileged that I am in a position to help.

Equity release FAQs

Why would I need a mortgage at retirement?
Through no fault of their own, an increasing number of people are carrying debt into retirement, or needing to raise new finance, and this can make the “Golden Years” potentially worrying.

You may need to repay a mortgage, finance some unexpected outlay or just make your retirement more comfortable. You may want to help your children with a deposit for a house, buy a new car, go on holiday or make improvements to your home.

The good news is that in all cases Equity Release can provide a safe and welcome solution and the choice is greater than ever which means I can usually find the right solution.
How old do you have to be?
What is surprising to many people I speak with is that you cannot actually be too old - you could however be too young!

Ideally, you will have attained your 60th birthday however there are a number of companies who will consider this type of mortgage from age 55. There are number of financial reasons why age 60+ is beneficial.
Do I have to sell my house?
The short answer is “No”

There is a specific scheme available called a “Home Reversion” scheme whereby the property is sold to the finance provider in exchange for a cash lump sum. I can assure you, however, that unless it were absolutely essential, due to your circumstances, there are numerous different options available that would enable monies to be raised whilst retaining full ownership of your home.
How / when is the money repaid?
There are many different options available in terms of making or not making monthly or ad hoc payments of interest. Essentially the total loan would only need to be repaid on sale of the property – either on the death of the last surviving borrower or at the point at which the last surviving borrower were to need to move into permanent residential care.

There is no “end date” within the borrower’s lifetime at which the loan would need to be repaid in full.
Am I likely to leave a debt to my children / beneficiaries?

Nowadays most Equity Release or Lifetime mortgage schemes come with a “no negative equity” guarantee.

It may be that ultimately you are unable to leave an inheritance however you can be assured that regardless of what happens in the housing market and regardless of the amount your property may ultimately be sold for there would be no onwards debt to your estate.
Many people I speak to say that Equity Release is a bad thing – why is this?
Sadly, due to schemes available in the past the term “Equity Release” has got itself a bad name.

The finance industry has had to adapt as the need for lending in retirement has grown at a staggering rate and in light of this the schemes of the past bear no resemblance to those available today.
Today’s schemes have so much regulation and protection in place however many people’s thinking and many people’s understanding of the schemes available is still stuck in the 1970's!

Like all financial transaction there are advantages and disadvantages and in some cases the costs and potential restrictions for the future mean that Equity Release may not be suitable for everyone.

Whilst most Equity Release mortgages are portable, depending on the type of scheme chosen, there may be an increase in debt in the future making it potentially difficult to move house. Again, this would be taken into account in each individual scenario.
Will the debt grow and wipe out any inheritance?
With some options the interest can be added on or “rolled up” over time meaning that the debt will grow. The lenders are very careful at the outset to limit the amount of money that can be raised to allow for the accumulation of interest. There are also “inheritance guarantees” available with many products which means that you are able to protect a percentage of the value of your property for the future if you so wish.
What are the costs?
As with any mortgage transaction there are usually solicitors’ fees, arrangement fees, adviser fees and in some cases valuation fees. As the costs can vary considerably from one transaction to another I would always clearly set out the costs relevant to your individual circumstances.

In most cases there is no need to pay anything “up front” as most fees can be settled at completion – meaning that no fees are paid until you get your money!
Can I involve my children in the conversations?

I actively encourage conversations with your family when considering Equity Release or retirement/lifetime mortgages. The transaction will have an effect on your estate for the future and it is important that all potentially affected parties are comfortable with the figures.

Having said this there may be reasons for wishing to deal with your finances independently of your family and this is also completely acceptable – after all this is YOUR finances we are discussing!

How I find the most suitable Equity Release or Mortgage option

Your home may be repossessed if you do not keep up repayments on your mortgage.

I take considerable care in working out which solution may be most suitable for each individual. My range of qualifications means that I am able to offer advice to anybody, regardless of their stage of life or how old they are. If you have questions about mortgage finance then I would strongly recommend speaking with me as I can then point you in the right direction.

1. Personal meeting

Unlike a “traditional” meeting at the bank, I feel that it is vitally important that I understand about you and your situation before attempting to make a recommendation. In many cases when I first speak with clients they are not clear as to the options available and are not entirely sure themselves exactly what they need. Fortunately, that is where I come in! During an initial meeting, I will do my best to listen to your situation and really understand your needs and preferences, your concerns and your plans for the future. Once I have a picture of you and your situation I can then start to take finer details and consider suitable options for your finances. I feel it is important to be able to offer flexible times to suit my clients as not everybody is able to meet during the traditional hours of 9 am – 5 pm.

2. Whole of market access

I am proud to be able to deal with every Equity Release/Retirement lending company available so will be confident that if you are considering raising finance in retirement I will be able to find the right lender for you. With regard to “traditional” lenders there are always going to be certain promotions and “special deals” available that I may not have access to. Equally, through my association with “Intrinsic” I am often able to secure exclusive mortgage options not available to other Brokers so, again, I am confident that I am able to offer a highly competitive selection of options. The way in which I am able to offer traditional mortgage advice is classified as “Whole of Market”.

3. Transparent fees

As already noted the fees do vary considerably from one situation to another. I do not charge for an initial consultation and in many cases I will meet with clients on numerous occasions to establish their needs fully prior to any cost being incurred. In most instances there would be no need to be out of pocket during the application process as most costs can be incorporated within the amount being borrowed. Again, this is all subject to individual circumstances however I ensure that my clients know exactly what fees will be incurred and at what stage of the process. I have surprised some clients in the past by advising against equity release if we have established that they have other, more suitable, alternatives available to them.
© 2021 Ferrell Financial Limited