Retirement freedom

This month Matt Begley, retirement planning expert at Harris Begley, helps dispel the myths surrounding Equity Release.

Did you know that you can’t see the Great Wall of China from space, Napoleon wasn’t short and Vikings never had horns attached to their helmets? These are just a few of the many myths that have evolved over time. Similarly, if you choose an Equity Release plan there isn’t the possibility that this may result in you losing your home (if it remains your main residence), nor will it leave any debt to your children. This is the case if you opt for a lender that’s a member of industry body, the Equity Release Council, which covers the vast majority of all new loans, as the Council has a number of rules in place to reassure borrowers that they’re protected.

“With the most popular product, a Lifetime Mortgage, you can raise funds (up to agreed limits), and not even have to pay off any capital or interest at any point during your lifetime.”

What is Equity Release?

If you’re not too familiar with this product, it’s simply another form of borrowing for homeowners aged 55+ that enables them to stay in their home. It’s also increasingly viewed as another element of the retirement planning process. With Equity Release, some of the value in your home is released in order to raise funds. You can then use that money for whatever reason you like, such as helping to clear an outstanding mortgage, enabling home improvements, gifting money to family and friends or perhaps, simply using it to treat yourself. In short, with the average 65 year-old UK adult having around 20 years of retirement ahead of them, the extra funds will hopefully assist the journey through this period.

How it works

With the most popular product, a Lifetime Mortgage, you can raise funds (up to agreed limits), and not even have to pay off any capital or interest at any point during your lifetime. The provider of the loan would reclaim the capital (and any accumulated interest) through the sale of the property, once the plan-holder dies or moves into long-term care. Of course, it may not be the best route for everyone, and other options do exist (such as downsizing), but Equity Release has become increasingly popular, with the Equity Release Council reporting record-breaking figures loaned in 2016 and the first quarter of 2017. However, this shouldn’t be a surprise, as the old-world view that retirement income will be largely based on pensions possibly doesn’t hold
true anymore.