The Question
I am 75 and I own a property in the Isle of Wight worth £350,000. I would like to sell this to move closer to my children and grandchildren who live near London. The problem is the type of home I would need in London is more expensive than the one in which I live now so I would need to take out a mortgage!
Am I too old and, if not, what are my options? I wondered if some kind of retirement mortgage may be the answer.
Mark’s Answer
Hello, and thank you for your question and I am glad that you have approached me as many customers do not realise that equity release can be used for ‘upsizing’, which I will explain about in more detail later in this reply.
When customers consider equity release, it is very important that they take advice and consider all options including downsizing to release equity naturally, using their existing savings and investments, and whether they want to make contractual, flexible, or no payments, dependant on their personal circumstances.
An independent, specialist adviser would help a customer build a bespoke solution based on their own individual circumstances and their capital requirements. With your circumstances it is clear, you will have a substantial amount of capital from the sale of your current home and although you may not be ‘upsizing’ in terms of the size of your new home, you will be upsizing in the value of your purchase.
The good news is that equity release can bridge the gap you need for your plans.
Let me explain and provide you with an example.
Equity Release has several options, and as noted, it is important to take independent advice before a bespoke solution is recommended for you. However, one popular way to raise capital is via a flexible Lifetime mortgage, and this can be arranged on an existing home, called a remortgage, or a new home called a purchase mortgage.
As you are selling your home and purchasing a new home, you can use some or all of the £350,000 capital from the sale of your current home (less any sale costs) and then raise a mortgage on your new home for the shortfall. This process works in the same way as any conventional mortgage when purchasing a property.
Based on your age, if you were to purchase a new home with a valuation of £500,000 in London a mortgage could be raised on that property, and the maximum lifetime mortgage (most popular equity release plan) could be £226,250, and possibly more dependent on your health.
Therefore, based upon how much of the £350,000 sale proceeds you wished to use (let’s say £300,000), you would then need a £200,000 mortgage to cover the shortfall. You would use the sale proceeds and the mortgage to complete the sale and conveyancing costs.
The availability of a lifetime mortgage is not dependent on your income – it is based on your age and the property you plan to purchase. Therefore, no affordability or income checks are required by the lender.
You also have other mortgage solutions such as Retirement Interest-only Mortgages or standard Retirement Mortgage over a fixed term, however these would be based on your income and affordability – both of which could be considered as part of your regulated advice process.
Therefore, I strongly suggest that you speak to one of our friendly independent, expert advisers without charge or obligation and they can explain in more detail what your options are based on the type of property you plan to purchase for your new home, where you will be closer to your children, who can attend the meetings with you and our adviser if you want them to.
Meet our expert…
Mark Gregory, founder and CEO of Equity Release Supermarket, is here to answer your questions. Mark is an adviser himself with over 20 years equity release experience.
He launched Equity Release Supermarket 10 years ago and it has grown to become one of the UK’s leading equity release specialists.
Email kate.saines@emap.com to ask Mark a question
