Equity Release is not right for everyone. What are the other options?

It seems to be that you can’t turn on the TV without seeing an advert for Equity Release.  

This is one area of the market that continues to gain momentum.  It gets a huge amount of airtime and column inches, yet its estimated to be just a £4bn part of a £260bn+ mortgage market and not necessarily right for everyone. 

Equity Release, put simply, is a scheme through which the asset rich can release funds from the equity in their property. This scheme normally applies to applicants approaching the twilight of their life although it is not uncommon for the newly retired to participate. Equity Release is highly regulated to ensure no high pressure selling and we always encourage offspring involvement.  After all, the equity is likely to form a major part of their inheritance and they should always have the opportunity of finding alternative methods of funding their parent’s lifestyle first.  Some providers also allow the interest to roll up, so there are no monthly payments, and some allow the capital raised to be used as future income.

What you don’t see in the adverts and on TV for Equity Release, are the alternatives.  When coming to the end of the mortgage term with your lender, it’s rare to be offered any additional products to stay with them as you are ending the mortgage contract (normally 25 years or more).  They also fail to advise you to seek further advice about re-mortgaging to another provider.  Despite ages possibly having achieved ‘later life’ status, there are options available and although this might cease on the high street, as their maximum ages tend to be between 70 and 75, there are a huge number of lenders who will still lend. 

Why should a customer not have a mortgage due to being in advance of normal retirement age?  We know people are working well in to their 70’s now and some are deferring pensions until needed.  So, for the right customer, with the right income and right loan to value of the property, a normal mortgage is still achievable.  These lenders will be building societies, or similar, dotted around the country but having been established for decades, even centuries!  They think outside the box, manually assess and will take a reasoned decision, rather than a computer based ‘tick box’ response.  They will also consider interest only options, assuming there is a suitable repayment strategy in place.

Terms and conditions always apply, and specialist advice should be sought as this can be a very complex matter and can affect future equity and income.