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• Property worth: £1,000,000
Mrs Harding lives at home alone with her dog, Jack. After her husband died, she never wants to part from the memories held in their home. Unfortunately, Mrs Harding was diagnosed with Parkinson’s a few years ago and although very mentally stable, she is now unable to complete day-to-day tasks without the need for care. The cost of her care at home is £1,400 per week. Mrs Harding does have her state pension, private pension and attendance allowance but still has a shortfall of £707 per week. That is £37,000 per year! Her two sons have suggested to their mum that she should go into long term care, to gain the assistance she needs. However, Mrs Harding is adamant that she will continue to stay at home with her dog for the rest of her life.
One of Mrs Harding’s sons set up a meeting with his financial adviser to talk about the options available for the circumstances. The financial adviser explained to the family that equity release in the form of an Enhanced Lifetime Mortgage with the feature of a ‘cash reserve facility’ is a great option for Mrs Harding.
Mrs Harding took an initial amount of £20,000 and then drew down around £18,500 every six months to meet her care costs.
2 years later
After living the next couple of years without the need of going into care, Mrs Harding sadly passed away comfortably at home as she wanted with Jack. The total amount Mrs Harding owes to the Equity Release provider upon her death is around £119,000. However, the value of her house has gone up to £1,100,000, so her two sons still have a worthwhile inheritance after the sale of the property. They are very grateful as the lifetime mortgage meant their mum got to be happy and secure until her passing.
Mr & Mrs Edwards
• Late 60s
• Property worth: £300,000
• Grandson with a baby on the way
Mr and Mrs Edwards are both in their late 60s, they have their only daughter Rebecca who has a son of her own called Michael. Michael, Mr and Mrs Edwards grandson, has recently finished his degree and started full time employment as an accountant. His girlfriend has recently fallen pregnant, so Michael is desperate to move out from living with his mum to be able to provide for his new baby on the way. Michael has next to no savings as he needed them to help him through his time at university. He wants to stay in the same area as his mum and his grandparents but due to costs of homes in the area, he and his girlfriend are unable to save enough for a deposit.
Mr and Mrs Edwards contacted their financial adviser to see if they would be able to help Michael and his girlfriend. However, in conversation, their financial advisor let them know that Mrs & Mr Edwards were able to gift Michael his inheritance early.
As Mr and Mrs Edwards own their house outright, they were able to use equity release to take out £20,000 of tax-free cash from their property and gift it in its entirety to Michael – giving him a great head start to be able to get on the property ladder. In fact, he was able to get a property right in the village with his mum and grandparents.
7 years later.
After a few years in retirement with their state pensions and a bit of a private pension, Mr and Mrs Edwards wanted to seek advice again from their financial advisor about the prospect of using equity release to enable them to enjoy their retirement a bit more comfortably.
Their financial advisor has now been able to go back to the lender and re-mortgage their equity release. As the property has already gone up in value, they are able to receive another £30,000 in a form of a drawdown. Mr and Mrs Edwards can take out the money as and when they want to spend it and they will only be accumulating interest on the amount they spend.
Rebecca is more than happy for her parents to use their tied-up equity as funding, so she can see them live the rest of their lives as best they can.
Mr & Mrs Smith
• 70 & 75
• Property worth: £450,000
• Dream of moving to the seaside
Mr and Mrs Smith have lived in the same town, in the midlands, their whole lives together. The couple have always had the aspiration that once retired they will have the savings to move down to their favourite place in the world, by the seaside in sandbanks.
Their son, Richard, flew the nest many years ago; he now works and lives in London with his young family. Mr and Mrs Smith are very proud of how much Richard has achieved, but they really wish they could spend more time with him and his family. What they would really love is their seaside home for the whole family to come and holiday to.
Mr and Mrs Smith started to look into the house buying process down in Sandbanks and came across their dream house… at £700,000! Unfortunately, the house is way more than the sale of their house, their savings and monthly income can afford.
Mr and Mrs Smith got in touch with an estate agent in Sandbanks to see whether they can find something just as perfect, but a little more in their price range. The estate agent told them a way of potentially being able to get the dream house they saw online. The answer being equity release. Mr and Mrs Smith knew about equity release but were unaware that you could do such a thing on a property you don’t even live in yet!
The couple had their current property valued, and it is now worth much more than they bought it for in 1965, and as a result they were offered £450,000.
They can now pay the short fall of £250,000 with a lifetime mortgage on the new house.
The plan is on an interest roll up with the option of an annual repayment to stop the £250,000 accumulating interest to the property. Richard would rather his parents not worry about more payments so he decided he will service their interest annually for them.
Mr and Mrs Smith can now enjoy their time relaxing by the seaside, with enough room for the family to come and stay during school holidays.
• Property worth: £520,000
• End of Interest Only Mortgage and in need of debt consolidation
Mr Pike has reached the end of his Interest Only Mortgage term. He was initially allowed 12 months to remortgage or sell the property to his mortgage lender. Despite several requests for an extension made by Mr Pike, they were all turned down. In addition to Mr Pike’s outstanding mortgage of £74,000 where he pays £350 per month, he also has a credit debt of £22,000 where he pays £386 per month!!
He only has his state and workplace pension as income. His financial adviser has confirmed he is not entitled to any other benefits, nor does he qualify for a conventional mortgage due to affordability. Mr Pike has completely exhausted his savings, leading to the increasing credit card debt to pay some general bills and essential purchases.
Mr Pike lives in a 4 bedroom house in Surrey, valued at £520,000. He is a prime example of ‘asset rich and cash poor’.
Mr Pike’s objectives are to primarily clear his outstanding mortgage and pay off the credit cards to improve cash-flow. If possible, he would also like to have money on the side too incase his money levels are low again, as a comfort blanket. His financial adviser has recently become qualified in equity release. The advisor is able to educate Mr Pike with a new solution that will tick every box. Firstly, they discussed all options before taking on another secured loan, such as ‘rent a room scheme’ or asking family for help. Mr Pike didn’t like the idea of a stranger living in his home, neither does he have anyone he can lean on financially.
In conclusion, the financial advisor recommended a drawdown lifetime mortgage with an initial release of £106,000 to meet his immediate needs, with an additional drawdown facility of £86,000 to withdraw further funds if and when he needs – without accumulating extra interest.
The advisor was able to show that with this solution, Mr Pike would be £734 per month better off!! Mr Pike can now carry on his retirement without the worry of not being able to put hand to mouth each month and staying in his home until he dies or goes into long term care.
To understand the features and risks of a Lifetime Mortgage, please ask for a personalised illustration.
Equity Release Midlands, your local experts
Equity Release Midlands is a trading style of The Later Life Lending Network Ltd, an appointed representative of The Right Mortgage Ltd who are authorised and regulated by the Financial Conduct Authority. Registered in England and Wales no. 09832887. Registered address: 70 St.Johns Close, Knowle, Solihull, England, B93 0NH. For Independent Equity Release advice we do not charge any upfront fees however, a fee of £1295 is payable on completion for our service in relation to lifetime mortgage contracts plus commission from the lender.The Information contained in this website is subject to UK regulatory regime and is therefore intended for consumers based in the UK.
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