To downsize or to take out equity release? It’s a common conundrum amongst older homeowners, according to Mark Gregory. Here, in his latest Q&A, he offers an insight into both options
The Question
My husband and I would like to downsize to release some money to pay for living costs. However, someone mentioned equity release and now we are confused about which option would be best.
How do we know which would be most suitable? Can we get advice and, if so, would we go to a mortgage adviser or a financial adviser?
To give you some background I am 78 and my husband is 86. We own a house which is valued at £390,000 and we are looking at retirement flats which are valued at around £250,000. If we stayed in our house we would need some adaptations to the garden and we would need a downstairs bathroom so we would probably need to release around £150,000.
Mark’s Answer
Thank you for your enquiry, and I can fully understand your conundrum as we find many customers asking themselves the same question.
I can fully relate that you can simply downsize and release equity naturally, and based on the information you have provided, you could sell your home, purchase a new retirement flat, and have approximately £100,000 in savings once you have paid your conveyancing fees and moving costs.
Over the last 25 years advising customers many have said they fully understand the option of downsizing, though typically they have said it is a ‘wrench’ to leave their family home with so many memories, or they have good neighbours, friends, and family close by and they do not want to move.
Therefore, as an alternative, they can stay in their home and release equity via a plan that can contain features that suit their circumstances. Equity Release is either a Home Reversion Plan which would include selling all of your home or a share in return for a cash lump sum or the more popular Lifetime mortgage where you retain 100% ownership of your home, and a provider would lend you capital that is secured against the equity in your home, like any conventional mortgage.
I can confirm that based on you and your husband’s age and property value you could get access to £150,000 to complete your adaptations, home improvements and retain 100% ownership of your home.
With a Lifetime mortgage, your plan would attract a fixed rate of interest which the provider will offer you if your application is successful, and then you decide if you want to make payments to service all or part of the interest and capital, or you can choose to make no payments though the loan will increase with compounding interest for the rest of your life if you make no payments. The loan will only need to be repaid on second death or when you have both left home due to long-term care.
Therefore, as you will see there are options for you and your husband and if you agree that you would prefer to stay in your home and make the adaptions, one of our friendly expert financial advisers will discuss your options for all later life funding without any obligation and provide you with explicit, open and transparent information including the interest, fees and charges with the plan that may suit you both.
They will assess your situation, make a recommendation and you will only pay for their advice if you are entirely happy and your application completes. Your family or friends can join any meetings with your adviser with your permission if you want them to help and support you
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
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