This week, Peter Sharkey looks at why thousands of people are using lifetime mortgages to buy a home in the sun.
Weather-wise, it’s been an extraordinarily mild year. Remember those summer barbeques; swimming in the sea; those long balmy nights when sitting outside enjoying a drink became the nation’s norm?
Of course, we’ll probably pay heavily for a year of unprecedented warmth with a prolonged, cheerless period of corresponding cold. Soon, as winter bites, the central heating will be on full (all day), while preparing to go out will take an extra five minutes as we wrap in scarves, hats, gloves and sturdy footwear.
Britain’s yo-yo weather, which manages to combine unpredictable summers with often bitter winters has long acted as an incentive for many to bid au revoir and escape to sunnier climes, either on a permanent or semi-permanent basis. Those of us left behind look on, harbouring a quiet admiration for the departing family’s willingness to take the plunge, a sense that becomes more acute each time one of their incoming emails remind us that the weather in the Mediterranean or the Gulf of Mexico is significantly better than Blighty.
Owning a place abroad was once a dream which required a chunky Lottery or Premium Bond win if it were to become a reality. Nowadays, however, an increasing number of people no longer need to leave matters to chance; instead, they take out a lifetime mortgage, the country’s most popular method of releasing equity from your home.
If you’ve read about equity release – and it’s been difficult to avoid the product’s burgeoning popularity among the over-55s – the probability is you’ve been told lots about tax-free cash, refurbishing your home, or even buying a place overseas with the proceeds, but there isn’t much information regarding lifetime mortgages. So, what is a lifetime mortgage?
‘Lifetime mortgage’ is simply the label given to a loan which allows you to unlock a percentage of your property wealth, tax-free, while retaining full ownership of your home.
There are hundreds of different mortgages, each suitable for different groups, from first time buyers to property investors, but lifetime mortgages, available to the over-55s, are unique because once the funds are received by the homeowner, there are no requirements to make monthly payments.
As you would expect, this particular characteristic adds to the mortgage’s appeal. However, should you be considering equity release, it’s important that your lifetime mortgage is taken out with an Equity Release Council (ERC) approved lender. Why? Because mortgages provided by these lenders contain a hugely important feature: a no-negative-equity guarantee.
What does this mean? In a nutshell, it means you will never owe more than the value of your home and cannot, therefore, lumber your heirs with a lifetime mortgage debt.
“Once people are told of this important safeguard, it puts their mind at rest,” says Rob Brennan, a director of The Right Equity Release Ltd, one of the UK’s largest equity release brokers. “We only deal with approved lenders because it means we can assure people that their heirs will never be on the hook for a mortgage debt,” adds Mr Brennan.
The peace of mind that comes built-in to an ERC-approved lifetime mortgage has encouraged thousands of folks to buy their sun-soaked holiday bolthole.
Mr Brennan tells of how one couple, who identified a “wonderful apartment” while on holiday, were initially a little unsure about equity release. They voiced their concerns when they met with an adviser who explained how the process worked, discussed the full range of plans on offer and produced a personalised illustration which took account of the couple’s current financial situation and how it might change by releasing equity.
Suitably assured, the pair found they were able to buy their dream apartment in western Spain at a sizable discount after noting an advantage of equity release which is occasionally overlooked. Once the lifetime mortgage formalities were completed and the funds transferred to their bank account, they were effectively cash buyers, a position they put to good use when negotiating the purchase of their Spanish bolthole.
“The wide range of lifetime mortgage plans currently on the market invariably means there is a suitable solution for most homeowners,” concludes Mr Brennan. Good news for those of us preparing to wrap up warm as winter closes in and thoughts turn to sunnier climes.
To learn more about equity release, visit the Moneymapp.com website.
Alternatively, for further details and to receive a FREE guide to equity release, telephone 0800 612 6755 and quote reference LIFEM1
THE WEEK IN NUMBERS – a Brexit special!
According to the House of Commons library, the UK’s balance of trade with the EU is minus £67 billion – ie we import £67 billion more from Europe than we export. For instance, we imported £46.7 billion-worth of EU-built cars last year, but exported just £18.3 billion-worth of UK-manufactured cars.
UK exports to the rest of the world are already almost one quarter (24.7%) higher than they are to the EU. Exports to Europe totalled £274 billion last year; we exported £341.9 billion across the rest of the world.
The percentage of MPs who voted in favour of the Referendum Bill in 2015 which triggered the EU referendum the following year. Of the 597 MPs who voted, 544 were in favour of giving the people a ‘final say’ in the form of a referendum.
According to BT, an estimated 480 MPs voted to remain in the EU in 2016. That’s more than 73% of the total, which perhaps helps explain recent events at Westminster.
For more financial advice, check out Peter Sharkey’s regular finance column, The Week In Numbers.