The Government’s reformed proposals to fund long-term care have left many concerned about the gap between the money provided by the state and the amount needed to pay for care in old age.
While downsizing is frequently recognised as a way to access value tied up in homes, this option is not suitable for everyone. Moving house can result in high financial costs and there are also emotional costs to leaving one’s home and neighbourhood.
But there is another viable option for homeowners– equity release. While nightmare stories from the 1980s of homes falling into negative equity are still worries for some, changing regulatory standards and improved products on offer mean that equity release has a place in the mortgage market.
As well as funding long-term care, increasing numbers are using equity release to pay for their retirement. Research by Saga found over half of over-50s are planning to spend funds raised from equity release to finance home improvements while others are using this money for holidays or to pay debts.
We are seeing more interest and applications for equity release as well as a wider range of products. In response to consumers’ needs, providers are offering drawdown products as opposed to just a lump sum. We have also recently seen the introduction of products which allow some contribution to the interest payments prior to conversion to a traditional “roll-up”-type facility.
The next step is to raise awareness of this option. Now is the time for brokers to consider equity release as a valued option and if they are not able to offer it, to research the many referral services so their customer can unlock value in their homes.