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The personal circumstances currently driving equity release enquiries and how to reach the right decision

The personal circumstances currently driving equity release enquiries and how to reach the right decision

By Geoff Charles, CEO of Bower,

COVID-19 has had an unquestionable impact on almost every area of our daily lives, but particularly on our personal finances. The way we plan to spend, save, invest, and borrow money has changed for the foreseeable future.

The equity release market continues to be strong, and this is partly due to people’s changing circumstances as a result of the pandemic. For many individuals it can be an ideal way to release cash without having to move or worry about monthly repayments.

Why are more people considering equity release?

Homeowners have long contemplated equity release as a way to help out loved ones financially, and with the property market becoming increasingly challenging for first time buyers, some are using it as a means to gift deposits to children or grandchildren to enable them to purchase their first home. With house prices high, and fewer high LTV mortgages available, it can be difficult to get a foot on the property ladder, and this is just one of the ways older generations are choosing to help out.

Others are using equity release to fund home improvements. With lockdowns forcing the nation to spend more time within their own four walls, people are beginning to re-evaluate what they’re looking for from their properties; whether that’s simply a larger or more comfortable space, or adaptations that make homes suitable for both work and leisure.

Then there’s the consideration that COVID-related redundancies and furlough have disproportionately affected older people. With over 60s facing a severe spike in job losses – more so than any other age group – and with the state pension age moving up, many have been left considering their options, and equity release can be a secure way to provide financial freedom whilst still being able to own their own property.

Is equity release the right choice?

Equity release can be a great option to explore for those who own their own property and require cash, whether that’s for additional retirement income, to fund home improvements, or to help clear existing bills. Like any financial product though, it’s important to consider the impacts and alternatives, as well as how any decision could affect you in the long term.

Firstly, an individual must be eligible. To be considered for an equity release product, they will need to be a homeowner, aged 55 or over, and able to pay off any remaining mortgage or secured loan with the amount of equity they release. The property must also be worth at least £70,000, be of standard construction and in good condition, as well as be the main place of residence.

If all of the above apply, equity release can be an ideal way to safely access tax free money from the value of a property, enabling someone to perhaps repay an existing mortgage, carry out home renovations or go on holiday to enjoy a comfortable retirement.

Some lifetime mortgages have the option of no regular payments, which can be appealing, and above all else, enable someone to continue to live in their own home, maintaining their independence in later life.

Naturally, there are some considerations to bear in mind, and for those keen not to affect their family’s inheritance, then releasing equity may not be the best option. However, it’s important to consider that there is the option to protect an element of equity.

Customers should also be aware that there may be financial penalties if they wish to repay or end the lifetime mortgage plan early, so it’s worth thinking ahead. It is also worth noting that a lifetime mortgage loan amount increases with compounded interest.

When it comes to dealing with what is likely to be your largest asset – your home – it’s crucial to make an educated decision, which is why it’s a good idea to speak to an experienced professional, who can take your individual circumstances into account when advising you on your options.

About Author

Geoff Charles is CEO of Bower, an award-winning team of financial experts specialising in equity release and Lifetime Mortgages. Bower is a member of the Equity Release Council and authorised and regulated by the Financial Conduct Authority.

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