Understanding both the pros and cons of equity release is vital for anyone taking out this product. Mark Gregory helps a reader who would like to learn more about equity release before taking the plunge
The Question
I am writing in the hope you can reassure my Aunt, who has asked me to send this letter. She is 78 and lives alone in a home which she owns outright (mortgage paid off years ago).
She needs some home upgrades but has little money to pay for these. So, we looked at equity release but my Aunt is a bit concerned about the bad reputation of equity release.
So, is it safe and what are the risks? We’d like to know the pros as well as the cons please so we can make a fully informed decision.
Mark’s Answer
Thank you for your letter on behalf of your Aunt, and hopefully I can provide you with some reassurances that may help you both. Firstly, as an adviser for many years and now a CEO of Equity Release Supermarket, I have 25 years’ experience of equity release and I can understand your Aunt’s concerns and hesitation.
However, I can confirm that the equity release industry has changed and evolved, and there are many flexible options to suit your Aunt’s circumstances. Unfortunately, you have not included your Aunt’s property value and assuming it is worth more than £70,000 she would be eligible for equity release.
Using a flexible Lifetime mortgage as an example at this stage, it may be possible for your Aunt to borrow and initial lump sum for her initial property upgrades and then drawdown further capital in the future if required.
During the application process, you and your Aunt could discuss your plans with one of our friendly whole of market fully qualified advisers who will answer all of your questions without obligations, and they will explain all of the feature’s risks and benefits and you would not have to pay for their advice until any application completes.
For further reassurance during the application process, you will have to take independent legal advice before you accept the application. Rest assured we have a panel of specialist independent solicitors if you or your Aunt do not have access to one.
As requested, please find some of the Pros and Cons of equity release to aid your decision making,
Pros of equity release
You aunt will still own 100% of her home and she will not leave a debt to her family as the plan comes with a no negative equity guarantee. She can borrow and initial lump sum with a fixed interest rate so you will now exactly how much you will owe.
Your Aunt can decide to make full, partial or no payments at all, the choice is hers. Your Aunt could move to a new property and transfer the mortgage depending on terms and conditions.
Cons of equity release
Even if your Aunt serviced the interest it will mean she will leave a reduced inheritance due to the initial lump sum. The loan may impact on her eligibility for means tested benefits. Depending on how long your Aunt lives, she will pay back a lot of interest.
Your Aunt will have to pay advice and solicitors fees on the completion of her application, though these can be added to her loan if she does not have the capital in her bank. As she is using equity from her home, your Aunt would not then have access to this capital to pay for long-term care should she need to do so in the future.
As noted, we have a friendly expert adviser who is available for you and they can discuss your options with your Aunt over the telephone, face-to-face or via video conferencing and of course with her permission you can attend all meetings to support and reassure her.
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
