Aggregrating the Best Equity Release News…

Recently, with the lending criteria being constricted by most high street banks, many first time buyers find themselves in a position where the deposit required to take out a mortgage is simply out of reach. It looks as though more and more homeowners are helping to share this challenge with their children using equity release as a tool to come up with the hefty deposits.

This may be seen as a welcome hand in a difficult time and goes to show that the recession cannot stifle innovation and determination. Equity release may affect the inheritance one is able to leave but many may agree that causes like this, among the countless other reasons, are well worth it.

One of the most talked about and potentially viable alternatives to equity release is to take a bold step and downsize to a smaller property. The Office of Fair Trading recently covered downsizing as an alternative to a selling a house and renting it back. The OFT stated that:

‘Relocation may also be costly and sale on the open market may take a considerable period of time, particularly in the current climate.’

For some, house prices are back on the rise and certain kinds of house are particularly rising but this is not to say it will make the sale any quicker or the move any easier.

If you feel particularly vulnerable to the current market situation then releasing equity may well be a viable alternative to moving house for some.

The leading equity release industry body, SHIP, have seen an increase in new customers looking to release equity in their property compared to this Quarter last year. Some attribute this to the recent rising house prices along with the shortfall that some see in their retirement allocations.

The fact that drawdown mortgages are now reported to take up 51% of the market suggests equity release is being used more as a scheduled supplement rather than for lump sum purchases.

Perhaps the increase is down to more government backing in the equity release industry after Baroness Hollis’ welcome intervention at the House of Lords:

Hollis claimed it was “distressing to see people unable to finance the retirement they need, while hanging onto an asset they could use.” See our views on the speech.

More recognition from the Government about equity release’s important role to play may see an even bigger increase for the next quarter.

Baroness Hollis of Heigham recently held a discussion with the House of Lords regarding equity release. Upon reading the transcripts, I got the feeling that Baroness Hollis was pro-equity release and her Lordship was eager to get to the truth about lifetime mortgages and home reversion plans. The crux of the issue was Baroness Hollis’ viewpoint that equity release should be a viable option for those who need long term care but want to stay in their homes with the neighbours that they have come to know.

I quote Baroness Hollis:

“Does he (the FS Secretary to the Treasury) agree that well regulated equity release can help to fund the adaptions and social care that will give an older person the choice of staying in their own home, rather than going into residential care.”

Baroness Hollis hits the nail on the head with her attitude and her call for the government to put to bed safety fears about equity release will be most appreciated. Equity release can provide the money to adapt houses so that moving into care may not be the only option available. The availability of equity release gives homeowners the choice to plan their future.

Now one of the key points that come up in any discussion about equity release is definitely the issue of how equity release affects inheritance. Understandably, applicants are concerned about leaving their families in the best possible situation. Given the current and unpredicted economic situation, however, some discussion has turned to how equity release can help one’s family in the here and now; when it is perhaps needed most. Up there with typical reasons to release equity such as world travel, replacement cars and visiting family; home extensions are perhaps considered a viable reason to release equity as some families prepare to reunite under one roof in a bid to see them through the recession. This harks of good old British camaraderie in the face of adversity, which this particular writer enjoys hearing about.

Without further consultation and discussion from an FSA authorised IFA about the different types of equity release schemes and home reversion plans along with your needs, requirements and plans for the future, it is difficult to deem whether equity release is suitable for someone. However, it is a bit easier to deem whether you aren’t suitable for one of the plans. The most important rule of thumb when deeming suitability is whether or not the applicant is both willing and able to move to a smaller and less expensive house. Sentiment plays a big role in this and often applicant’s want to remain in the house they know and love. However, if they feel that moving house is no big deal then this is might be an alternative way to release equity.

Unlike other mortgages, the equity release market looks set to grow during the coming periods in the recession. The performance of the stock market and the FTSE 100 affects some of those of a pension age quite dramatically. With billions wiped off the market during the recent turmoil, the shareholders are left short changed from their investments. Some of the major shareholders are in fact pension funds and other types of mutual funds which some people rely upon for annual dividends and returns. Without these, some may be looking to secure alternative funding for their retirement. Equity release can be one of those alternatives and the market is expected to grow as the economic recession continues.

This is one of the more popular questions posed to equity release advisers across the country. Unfortunately, it can also be one of the trickiest to answers and especially without a further, in-depth conversation and consultation with you personally. How much equity you could release from your property may depend on a number of different factors that may need to be explored in-depth before a reasonable estimate could be given. These factors may include the type of equity release schemes or home reversion plans that you go for, the amount that you would like to release, your age, your property value and the amount of secured loan on your property. Remember, these are just some of the factors involved and there may potentially be many more parts to the equation.

For most looking to take out equity release of some kind, it will be a big decision that involves some long-term planning and aforethought. With most decisions of this nature, some form of advice usually takes place. Equity release is usually no different. There are a range of options for those looking to seek advice on whether or not they should take out equity release and if so, how they might go about it. Equity release can be a very useful tool for retirement planning yet it is not always for everyone. An advisor might be able to distinguish between those who are suitable and those who aren’t.

Now there is an old saying around that says “There are only two certainties in life; death and taxes.’ Now as true as this saying is for most of the things in life, it doesn’t apply to equity release because usually, the money that you release from your property is totally tax-free. No windfall tax, no income tax or any other kind of tax for that matter. The reason being is that it is already your money. You have paid tax on it before and so will not have to pay tax on it again.