Equity release products such as Later Life mortgages enable homeowners to utilise the cash tied up in their homes without having to sell first
A new year often brings a determination to do things differently or make good on goals not fully achieved in the previous 12 months.
For many, this might mean reassessing household expenditure to see if savings can be made, or identifying new forms of income. For those nearing or in their retirement years, it might well include considering a form of equity release such as a Later Life mortgage, to overcome income shortfalls and improve their quality of life.
Later Life mortgages explained
Later Life mortgages allow people aged 55 or over who wish to raise money for any one of a multitude of objectives to access the equity which has built up in their home, without having to sell it. This can be taken as a lump sum, with or without additional funds in reserve, but the outcome is the same: funds released tax free for whatever they want or need to spend them on, from paying bills, to travelling around the world, renovating their home, or helping family members with their own financial challenges.
Later Life mortgages have been steadily rising in popularity as people look for more ways to raise money amid high interest and inflation rates. And as they become increasingly flexible and transparent, they are becoming more widely understood. Indeed, MoneySavingExpert founder Martin Lewis has recently changed the description of equity release products on his popular website from “risky” to having “long-term implications” in recognition of the fact that the strong safeguards in place for this type of product mean they are not inherently risky.
There are several types of Later Life mortgages available. For those who have an income and can afford to make payments, there is the retirement interest only mortgage (RIO). This releases a lump sum, is based on the income of the youngest borrower and requires monthly interest payments for life. It is repaid when the last borrower dies or moves into permanent care.
Another popular option is a Lifetime mortgage. This is a loan based on the property value and the age of the youngest borrower, with no requirement to make any payments. Voluntary payments can, however, be made each year, and the equity can be accessed as either a lump sum, or staggered, with some money released immediately and the rest held in reserve. Interest is only payable on money that is accessed and ultimately, this type of loan is repaid from the sale of the property when the final borrower dies or moves into care.
Regardless of the objectives for exploring Later Life options, every homeowner will need expert advice to navigate which is the right solution for them. And now may be a good time to set that ball rolling.
Our analysis of Later Life products shows that rates are now lower than at the start of December 2023, and we can also advise on whether remortgaging your current loan to a lower rate is an option. We will also discuss all possible scenarios and provide illustrations to talk through with your beneficiaries, so everyone is fully clued-up on future implications as well as the numbers involved at every stage.
As always, the Henry Dannell team is here to provide expert advice and guidance which will enable you to make informed decisions. Get in touch with us to find out more about our offering and how we can help you achieve your mortgage goals.
Please note: Later Life product options include Retirement Interest Only and Lifetime mortgages. To understand the features and risks, always obtain a personalised illustration.