Equity Release Mortgages
The lack of trust in the stockmarket, government state pension, company pension schemes and the NHS system has pushed Home Equity Release Schemes benefits to the forefront of people’s minds.
A longer more active life is the prospect for most thanks to medical advances. Most retired people enjoy a good standard of living in retirement thanks partly to increase homeownership. Significant increases in property values have created a worthy asset in retirement, something that wasn’t enjoyed by previous generations.
But not as rosy as one may think, inflation proof pension schemes are now a rarity. Personal Pensions, Company Pension Schemes, Group Pensions and State Pensions have failed to keep up with the real cost of living thus creating a dislike of them as a means of creating wealth in retirement. It is a fact of life that ‘inflation proof’ pension schemes will be a thing of the past and according to the Office of National Statistics most people do not consider making adequate pension provisions until it is too late.
The lack of forward pension planning and/or lack of return on a pension investment wasn’t a serious problem as the majority could rely on the State Pension to provide an adequate back bone to financial security in retirement. The current generation of 50 plus adults will be on target for a pension worth 66% of their final salary and a meagre £84 a week from the State Pension.
We know that future generations will have it even worse and now have to contemplate work even longer before having any sort of help from the Government. The state retirement age will move from 65 to 68 and then well beyond making Britain’s youth face a bleak future as poverty stricken pensioners.
Equity Release Mortgages
Bricks and Mortar could hold the key for future pension provisions. Equity Release arrangements include lifetime mortgages and home reversion schemes and both are designed to release money to people who are in need of income in retirement. The Equity Release mortgages are fast becoming the choice of the elderly and the mortgage companies that offer these equity release arrangements offer them from the age 55 to 60.
The Equity Release mortgage works by taking a charge over the property, the pensioner (homeowner) is granted the right to occupy the property until they die or go into care, at which time the money is paid back from the sale of the house.
The money released from the home can be used for a variety of needs such as Care, Holidays, Income, Consumables, home improvements or even a trust fund for grandchildren.
As experienced by landlords who buy property under the buy to let mortgage scheme house price growth can create substantial financial wealth and if you can tap into this wealth via an equity release mortgage could be the answer to prosperity in retirement.
According to Halifax Price Index (HBOS group includes BM Solutions, Birmingham Midshires, Bank of Scotland and The Mortgage Business) house prices have risen by an average of 187% across the UK since 1996, with the average UK price rising from £62,453 in 1996 to £179,425 in 2006. Therefore the average increase per a year has been 10.6% thus outperforming the increase in income growth. Most pundits would say that at least homeowners of today should have enough equity in their homes at retirement to give a pool of funds to subsidise there state pension and state second pension.
It is only a matter of time before property takes a central role in funding retirement, something many professional landlords and amateur landlords realise. Most Landlords have become property investors to provide wealth in retirement.
It is only a matter of time before property takes a central role in funding retirement and this will become a stark realisation as soon as the next generation. The next generation will soon realise the UK has a Pension Crisis.
Find Equity Release Mortgages
Sourcing information on equity release mortgages can be more challenging than finding a homeowner mortgage or even a buy to let mortgage or self cert mortgage. There are no dedicated online financial help sites but many mortgage brokers are now offering equity release mortgages.
Warnings do exist in respect to choosing an equity release scheme, the most important is making sure the family is aware of the intention to take out such a scheme. Financial Advisers do offer advice but this sector of the market is and will become ever increasingly regulated.