Sweeping changes to mortgage regulation which came into effect in April have forced banks and building societies to tighten lending criteria, leaving many people struggling to buy their first home. Strict limits on salary multiples, stringent affordability calculators and increased scrutiny of self-employed applicants are just some of the new issues involved.
This situation is exacerbated by the recent resurgence in property prices and sluggish growth in wages, so being able to save up for that elusive deposit is now harder than ever. Large numbers of people in their 20s and 30s (and even 40s) are forced either to continue paying extortionate levels of rent or live at home with their parents. Furthermore many of those staying in the parental home often have children of their own, leading to lots of noisy, congested households!
But there is a potential solution to this problem with increasing numbers of those aged 55 and over waking up to the fact that the large sums of equity tied up in their property could be used to enable their children or grandchildren get a foothold on the property ladder. The dynamic marketplace for equity release loans – also known as lifetime mortgages – means that rates are very competitive and products more flexible than ever. Borrowers can choose to make monthly interest-only payments, or simply allow the interest to roll-up. Some products allow regular lump-sum overpayments to reduce the balance while others have ‘inheritance guarantee’ features which enable the borrower to ring-fence a specified percentage of the property value.
The key fact is that releasing money in this manner and passing it onto loved ones at a time when they need it most could make much more sense than leaving it in a will many years from now. More and more ‘older’ people have found it incredibly rewarding to be able to help their children get settled into a new home, perhaps with a garden for the grandchildren to play in. Of course, such a beneficial outcome could also potentially be achieved by ‘downsizing’ but this may not be an ideal solution for everybody and highlights the need for expert guidance through the various options. So please call now to arrange an initial appointment with one of our knowledgeable advisers who can find the best solution whatever your need for releasing equity.