Martin Lewis Is Right About Equity Release - Do You Really Need the Money? (1 of 4)
On Friday 29th of January, 2021 well-known financial consumer champion and journalist, Martin Lewis, received a question from a woman called Sue on ITV’s This Morning program, who detailed she was mortgage free in a house worth around £400,000. She asked the Money Saving Expert for his advice on how she could free up money without having to sell her house.
This is my response to the comments he gave in reply and why I mostly agree with Martin Lewis whilst giving some deeper context and correcting one or two errors he made and omissions that you will also want to consider:
Martin begins by asking the caller ‘are you sure you can’t sell your house, are you sure you can’t downsize?’ I respond to this here in Part 1 of my 4 part blog series.
He goes on to ask ‘do you really need the money you are asking for?’ My response to this follows in Part 2 of my 4 part blog series.
Downsizing is just one of several alternatives to releasing equity, discussed with each customer. We are not here to sell something that a customer neither wants nor needs. As an adviser, my only concern is that the right solution is reached to fund your financial requirements.
Crucially, I encourage conversation with family or other close confidants who may give some trusted support and reassurance where needed, independently from any professional advice. Those conversations can lead to a family financing arrangement or even to discussions about moving closer to younger generations or joint-living arrangements. Of course, for some they will still be very keen and able to pursue independent living and relocating away from their own lives may be a less envious option.
When downsizing you can research the areas you would be happy to live in using estate agents in the locality or by using online property websites, such as RightMove, to get an idea of availability and cost of suitable properties. Remember to factor in the cost of moving – including solicitor’s fees, house removal services, estate agent’s fees, survey fees and stamp duty payable on the purchase if applicable.
Pros of moving could include moving to a more manageable property to maintain independent living, a move to a more favourable location (perhaps closer to family) and to move to a property with lower running costs, such as lower energy bills and maintenance costs.
Cons of moving may include leaving behind family and friends, lifestyle changes due to reduced facilities in the area and less space if moving to a smaller property.
Consider the location of your current home compared against any property you are considering moving to - the neighbourhood, access to local amenities such as health services, shops, public transport (in case you lose the ability to be able to drive in later life) and proximity to your network of friends and family.
Also, consider the property and whether it is future-proofed to be manageable should there be any change to your mobility in the future. It may be that you need to consider access to the upstairs by way of a stair-lift, or installing downstairs facilities such as a washroom or bedroom. Would a move to a bungalow, ground floor flat, or mobile home be more comfortable?
Lifetime Mortgages Are Flexible – Changes in Your Future Circumstances
Many clients I have advised over the years have had an intention to downsize in the future, but have had many years ahead in their current home before wanting to do so. For these clients it is an option to repay your equity release plan on sale of property, with some further charges on doing so potentially applying depending on how far into the future. There is also the option to transfer the equity release loan to the new property, subject to the property value and size of the outstanding loan and the property meeting the lender’s criteria.
Equity release may involve a home reversion or a lifetime mortgage, which is secured against your property. To understand the features and risks, ask for a personalised illustration.
Equity release requires paying off any existing mortgage. Any money released, plus accrued interest would be repaid upon death, or moving into long-term care.