Homeowners are increasingly seeking alternative ways to harness their financial resources to provide extra income when facing financial difficulties; they can even provide a helping hand to their children or grandchildren. Helen Barnes, a Senior Advisor in our Later Life Finance team, explains what homeowners should consider when looking to borrow money against their property.
Recent research from The ONS states that a staggering 93% of adults have reported an increase in their living costs compared with a year ago, while almost three-quarters (80%) say that costs have become more expensive in the last month alone*. 42% of adults who are responsible for energy bills were finding it ‘very or somewhat’ difficult to make the payments, while 3% were behind on energy payments*.
Those who have already experienced difficulties due to the pandemic, and now high inflation and high interest rates, are turning to their property wealth to provide extra income. As a result, industry commentators expect the average age of a lifetime mortgage customer, a type of mortgage available exclusively to homeowners over the age of 55, to fall as homeowners dip into their property wealth earlier.
- Lifetime mortgage in practice
We helped a couple whose energy bills have risen to £840 per month. We arranged a lifetime mortgage for £50,000 which they are using to make a number of energy-efficient home improvements including double glazing, a new heating system and upgraded insulation. They are also installing solar panels, and together these improvements are expected to reduce their energy bills by 50%. It will also move their property’s EPC rating from E to C or better.
If you are thinking about borrowing against your property, here are a few things to consider:
• Speak with a professional adviser to understand whether this is the right decision for you and to work out how much you should release from the value of your property
• If you have funds available from savings or investments, it is sensible to include these in your discussion
• Make sure your advisor explains all the advantages and disadvantages before you go ahead. For example, a lifetime mortgage normally allows interest to roll up and your mortgage will gradually get larger over time
• Think about the impact it might have on your tax position and benefits entitlement
If you would like to know more about our later life finance service, or to discuss your own borrowing requirements, get in touch with our Later Life Finance team. Our advisers are experts in their field and can help you understand your options.
* Data published by the Office for National Statistics