At any gathering, there’s a subject that never seems to be away from the forefront and that’s the price of houses.
Naturally, this is the case in the early 2022, as information from various indices point to a housing market which continues to rise to new levels. For instance, in April it was reported that the Rightmove House Price Index reveal that the median price of a house that is coming on the market hit a new record for the third time in a row and was less than PS360,000.
To put this in perspective, it is an increase of 10% over the year before and surpasses PS50,000 more than the number that was record in March 2020 prior to the outbreak that led to a lockdown in the UK.
For homeowners who own their homes, the rising value of property may provide some relief even in the face of the recent pressures on the cost of living, particularly for people whose financial plans could impacted by the Covid-19 crisis or other unexpected events. This could be one way of explain the recent increase in the amount of equity release as well as the growing amount of people looking to release the value that has built into their homes.
The figures provided by data from Equity Release Council show that record quantities of property wealth were accessible through equity release options in 2021. With the value of the equity released surpassing the PS4bn mark at the beginning of the year, and finish with PS4.4bn in new loans during the 12 month period. The average equity release user took out PS125,000 in a single lump-sum or by drawing down incrementally that. According to the Equity Release Council has equated to more than seven years of the typical annual net earnings of a pensioner. Or more than four years for couples.
This trend continued through 2022, with the number of customers using equity release at a record quarterly record between February and January 2022 which saw lending rise 14% year-on-year to PS1.53bn.
Restoring your property investment by equity release
Equity release lead generation is only accessible to homeowners who are 55 or over. It is dependent on the fact that they receive the tax-free lump sum. And regular cash flow from an equity release product that is usually a life-time mortgage that is secure by the value of the house. They will remain in the home in the same way and as an a homeowner is not affect.
In the event of a life-time mortgage, your loan along with the interest will be repaid by your current estate. After the homeowner is either decease or move into long-term care permanently. There is no requirement to pay monthly however this could be possible on certain plans that allow homeowners to cut down on their amount of borrowing.
There are many reasons people in their later years opt for equity release. It can provide an opportunity to balance debts and improve their financial standing. For others , it can provide an opportunity to finance expenditure plans. Or to provide financial assistance for families as well as loved ones.
With the rising property price increases, equity release may let parents share the gains from their properties to their kids. Research suggests that one out of five plans was formulate to achieve this goal in 2021. This included an average of PS58,734 handed down to younger years who want to get on the ladder of property development.
Be sure to be fully inform
Based on this it’s not difficult to see the benefits for equity release. It is important to note that this may not be suitable for everyone. And there are obvious implications with this method including the fact that accessing equity throughout your lifetime is likely to reduce its value. Inheritance wealth, which could impact your inheritance planning.
The Financial Conduct Authority (FCA) recently highlight the importance of potential clients being well-informed. And supported in their equity release journey. The financial industry has also enacted various safeguards to make sure that home owners are provided with the right information prior to signing up to equity release in order to ensure they are making a rational and informed decision.
Participants who are members of the Equity Release Council (ERC) for instance. Have made it a requirement that customers attend at least one meeting in person with a lawyer prior to putting out plans. ERC member plans also include the “no negative-equity guarantee”. Meaning that the amount due by your estate will not rise higher than the property’s worth at the time of sale.
Professional advice for equity release
Even with safeguards like these, major decisions should not taken without seeking professional advice. It must be subject to the particular circumstances. To ensure that if you choose an equity release option, that it’s the correct choice for you.
The borrowing of money against the value of your home lowers its value, as well as the tax you owe. To fully understand the benefits as well as the risks. And costs of a lifetime loan get in touch with us for an individualized illustration.
There could early-repayment penalties if you wish to cancel the loan or pay off the loan in advance, unless you die or are placed in care.
The information in this publication is not financial advice or medical advice information. It is to provide general information only. There is no warranty, express or imply, is made regarding the information. Vintage Wealth Management or its affiliated representatives will not be accountable for any editorial. Technical or typographical errors or omissions contained in the contents of this communications.