As the cost-of-living crisis continues, debt is becoming an increasing problem for many households. In this week’s equity release ask the expert column, Mark Gregory helps a couple who are considering equity release to manage credit card debt
Question
My husband and I have acquired some debt in recent years. We have around £20,000 on credit cards and we also have our mortgage which still has around £100k left.
We wondered if equity release might be a good option for us because, with the current cost of living pressures, we are struggling to see a way to get on top of our finances.
Based on other houses sold recently our property is approx. £515k to £545k in value. I am 70 and my husband is 68. Would equity release be an option? Can we use it to repay debt?
Answer
Hello, and thanks for your question relating to replacing your debts with the equity you have built up in your home.
Firstly, from the information you have provided it appears that you are eligible for equity release, and replacing debts to provide you with more flexibility and choice may be a good fit with your personal circumstances.
However, it is important to inform you that we do not provide specialist debt advice, and you may wish to discuss your options with a qualified debt adviser/councillor who may be able to help you negotiate with creditors or they may be able to replace your debts with better terms, conditions, and interest rates. For example, replacing short-term unsecured credit card debts with a Lifetime mortgage may be beneficial in the short-term; however, the debt will increase with compounding interest for the rest of your life if you do not make payments.
Similarly, replacing your existing mortgage with equity release may be a consideration for you, but before you consider a re-mortgage, it is important to understand what options you have with your existing mortgage. For example, what is the current interest rate, is it an interest only mortgage or a capital and interest repayment arrangement. What is the outstanding term on your existing mortgage and are there any early repayment charges.
Many customers like the flexibility of equity release, and you have choices including a Lifetime mortgage and a Home Reversion plan. Furthermore, a Retirement Interest Only Mortgage (RIO) could be a viable option for you, and all of these products have features, and benefits that may be beneficial to you.
Taking an assumed mid-way valuation of £530,000 and based on a Lifetime Mortgage which is the most popular form of equity release, the maximum you could raise currently (29.8.2023) would be up to £191,860 (36.2% of the property value) on the Just Retirement J6 plan.
Furthermore, if your husband has any history of ill-health, this maximum amount could be enhanced even further based on the severity of these conditions. However, we would only advocate you take the amount you require, as the higher the loan-to-value, the higher the interest rate charged by the lender. If you have a specific amount in mind, our smartER research tool helps you find all products and interest rates in your own time, and allows you to request a quote.
Therefore, I would strongly suggest that you talk to one of our friendly expert, independent equity release specialists who will be able to advise you without obligation once they have a clear picture of your monetary requirements and your current situation.
Rest assured Equity Release Supermarket will not charge you for advice until any plan recommended completes, so you can spend as much time with one of our advisers as you need without any obligation. Equity release offers you flexibility and choices; however, it is important you take advice and ensure all options are considered and any recommendation is bespoke to your circumstances.
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
