Unlocking Property Wealth

Plan for the worst, hope for the best

With the rapid changes that have swept the world over the last year resulting from the coronavirus pandemic, some people aged over 50 are facing a different retirement than they may have been expecting.

Some have less savings than they imagined, some have had to access their savings to supplement their income and some have retired earlier than they had planned.

Financial affairs in order
For many, the 2020 experience was a taster of what retirement could be like – as well as providing a jarring reminder to people to put their financial affairs in order.

Unfortunately, not everyone has sufficient pension savings to fully recover from these events, which has led some people to look for alternative ways to fund their retirement. One of the options is using their property wealth.

Home ownership among over-50s
People in the UK pay off their mortgage at an average age of 54, according to recent research[1]. The average home value is in the region of £240,000. That’s a significant amount of wealth to have tied up in property, particularly for those people who don’t have enough cash to cover their everyday expenses.

Downsizing is one option for accessing that wealth, but the research highlighted that more than half of over-50s say they love their home and couldn’t imagine moving to another property.

Accessing the cash without moving out
A second option to make use of property wealth – without the hassle of moving – is through equity release. Equity release can mean either a lifetime mortgage, where a loan is secured against the home and the homeowners are not required to make any repayments during their lifetime, or home reversion, where a portion of the home is sold but the homeowners retain the right to live in it.

Equity release unlocks the value built up in your home as a tax-free lump sum. There’s no need to move out and you’ll still own your home. With equity release, you don’t have to make monthly payments unless you choose to. It’s usually repaid when the last borrower moves into long-term care or dies. Equity release also comes with a ‘no negative equity guarantee’, which means the beneficiaries are not left with a bill.

Deciding which option is right for you
Equity release isn’t for everyone. 10% of over-50s say it’s the option they’re most likely to consider if they need more cash in retirement, while 27% say they’ll retire later or come out of retirement, and 32% say they’re more likely to downsize.

However, 90% of over-50s say they only understand a little about equity release. Some of the common concerns are that they don’t want to risk losing their home, that they won’t be able to leave an inheritance or that their children will be left with a bill, but these are
all misconceptions.

Source data:
[1] https://www.sunlife.co.uk/equity-release/equity-release-report-2020/

HOME REVERSION PLANS AND LIFETIME MORTGAGES ARE COMPLEX PRODUCTS. TO UNDERSTAND THE FEATURES AND RISKS, ASK FOR A PERSONALISED ILLUSTRATION.

EQUITY RELEASE WILL REDUCE THE VALUE OF YOUR ESTATE AND CAN AFFECT YOUR ELIGIBILITY FOR MEANS TESTED BENEFITS.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.

YOUR MORTGAGE IS SECURED ON YOUR HOME, WHICH YOU COULD LOSE IF YOU DO NOT KEEP UP YOUR MORTGAGE PAYMENTS.

CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT.