Before arranging an equity release plan, one option to consider is to down-size. So how does this work? In practical terms, this involves selling your home at a higher price than the one you wish to move into. Any capital released from the sale of the property can then be used to supplement an income in retirement or provide capital for larger one-off expenses such as replacing a car.
In principle, downsizing is a great option and it’s one of the areas that advisers at The Right Equity Release always consider during their initial discussions with clients. However, there can be a number of reasons why this proves to be unsuitable.
Recently I was approached by a couple, both aged 69 and in good health who currently live in a detached bungalow worth £250000. They have lived happily in the property for over 20 years and it’s in a ‘nice area’.
They owe £95,000 on an interest only mortgage and their lender has told them they need to re-pay this by the time they’re 70. Unfortunately they do not have the capital to do this and they have been unsuccessful in their attempts to re-arrange their mortgage or to raise money from other sources including their family.
So they could down-size:-
They could sell up and move to a lower valued property. They have already considered this and they know that properties in the area will cost at least £215000-£220000. After taking into consideration the costs of moving and the repayment of their mortgage they would have to consider properties costing around £150000 in an unfamiliar area miles away from family and friends.
So now let’s look at a solution
Most people in this situation would feel their only option is to move and to suffer the consequences of doing so. However, by up-sizing’ and utilising the capital released through an Equity Release Scheme they could fund the purchase of their new property and still remain in the same area.
By taking out an equity release plan on the property they’re purchasing they can now raise the money they need to fund the gap between the capital released from the sale of their current house and the purchase price. It would still mean they have to move but at least now they have the opportunity to stay near to where they live.
When I presented this as a possible solution, they told me that it had ‘taken a great weight off their minds’.
With Equity Release Plans we can offer clients:-
- A plan with varied options and features, personalised to meet client’s individual needs.
- We may be able to provide sufficient funding to ensure the clients remain in their existing homes rather than having to move and finally,
- The opportunity to purchase a property which they’re happy with rather than taking on a property ‘because they have to’.