Figures released this week show that an increasing number of ‘equity rich, cash light’ BabyBoomers are deciding to sign up for Equity Release schemes and are borrowing record amounts against their home’s value.
Almost £400m was released from homes in the first quarter of 2016 by older homeowners looking to unlock money tied up in bricks and mortar without having to make monthly repayments, however, these ‘lifetime mortgage’ lump sums often come at a high cost in the medium term, with rolling interest on the amount borrowed the norm.
One worrying example shows a couple taking £70,000 of equity from their home being required to pay back £118,000 five years later when they needed to move into a care home.
There are also an increasing amount of adverts on television promoting Equity Release/Lifetime Mortgage products, with Aviva and Legal and General becoming the biggest players in this market. However, there seems to be little information for those looking for alternatives to signing up to such an inflexible commitment.
The growing trend in Equity Release plans also highlights why anyone within ten years of retirement age, or even vaguely considering borrowing against the value of their home, should undertake an independent mortgage review as a matter of urgency.
For example, here at The Financial Planning Group, we have lenders who would lend to borrowers up to the age of 85, with rates from 1.49%, and can obtain a mainstream mortgage for a 55-years-old with a 20-year term, provided they have pension or employment/self-employment income. Both options offer individuals a genuine alternative to the restrictions of an Equity Release plan.
This is just one example of why it makes sense to undertake a regular financial review and consider taking positive steps to prepare for the future. We take pride in providing the very best advice and help for you and your family with the aim of finding the perfect deal for your circumstances.
To speak Steve Padgham about your property finance or mortgage requirements, or to find out how to go about securing the best low-rate deal currently on the market six months ahead of your current deal ending, please call him on 020 8614 4782, or e-mail steve.padgham@fpgonline.co.uk.