There have been made changes in Equity Release since I arranged my first Lifetime Mortgage with Northern Rock back in 2001. Unfortunately, at that time, the industry was marred with a poor reputation and the idea which has persisted since, is that taking equity release should be seen as a ‘last-resort’, something that should only be considered when all alternative avenues for finance, including down-sizing or asking family members to help out have been exhausted.
Although we must take these alternatives into consideration, perhaps with the wider range of options now available, the idea of Equity Release being the ‘only or last resort’ is no longer the case.
Ten years ago, interest rates were much higher and with the addition of rolled up or compound interest, the effect would be that the original loan would double every 11 years or so. Today however, some lenders are offering rates which are fixed for life at under 4% and this has a big effect on the way the debt increases. For example, I saw a client yesterday who is in his mid-70’s and in his case, the loan will now take over 18 years to have the same effect.
But low interests are only one aspect with Equity Release. Some lenders offer the facility to make regular monthly payments which for many mean that they have the opportunity of replacing their existing residential interest only mortgages, but without the fear of losing their home if they cannot or choose not to make these payments in the future.
There are lenders offering not just long-term fixed rates but variable rates which track the Consumer Price Index (CPI) so for those clients wanting to take advantage of even lower rates, and are willing to take more risk, these may be a more suitable option than a fixed rate.
There are loans available for those in poor health who may require additional funds in excess of the usual lending criteria and for those clients who are wanting to take a lower amount of money today but have access to additional funds in the future there are lenders offering a reserve or draw-down facility.
The range of products and options available are so varied that for those who are looking at a way of obtaining additional funds in later life, who want to retain ownership of the property, perhaps rather than it be the last option, it should be something to consider at a much earlier stage.
In my early career in Equity Release, these products were often seen as an add-on to the services provided by mortgage brokers but today they offer so much more and the guidance provided by specialist equity release advisers such as ourselves, is so very important.