Equity Release Advice

Should you consider a lifetime mortgage in your retirement?

Home ownership allows people to build a stable life for themselves and their children, while also building up equity in a valuable asset until they eventually own it outright

Our priorities often change as we go through life. When we are young, we may look for adventure and value flexibility over stability. As we get older, however, we may want to settle down, have children and buy a family home. Home ownership allows people to build a stable life for themselves and their children, while also building up equity in a valuable asset until they eventually own it outright.

Then children fly the nest and parents have to take decisions about their retirement, in particular where they are going to live and how they are going to finance the lifestyle they want.



To downsize or not to downsize

That is the question facing a lot of people as they near retirement. Obviously, answering it will depend on a lot of factors, but possibly the most important one to consider is whether or not you are happy in your current home. If you'd actually like to move anyway, then it may make perfect sense to move to a smaller property.

If, on the other hand, you're happy in your current home and your interest in downsizing is mainly from a financial perspective, then make sure to do your sums very thoroughly before taking any final decisions as you may will find that downsizing would not actually be a major financial win, at least not after moving costs. Staying in your current home and accessing its equity via a lifetime mortgage could be both less hassle and a better financial deal.



The issue of inheritance

In theory, it's lovely to be able to leave a property to your children (or other heirs of your choice). In practice, unless you plan your finances carefully, you could end up handing over more to the government than you do to your heirs and there are two main reasons for this.



The cost of care

It's difficult to make hard-and-fast comments about this issue because it essentially depends on the policy or policies in force at the time you need care and this will, effectively, depend on the government of the time. Some governments might be happy to set a fairly low level of personal contribution and then have the state take over, others might expect a person to exhaust any and all funds they have, including selling their home before the state will take over.



Inheritance tax

Again, in principle, this will depend on the policy of the government of the day (and also on an individual's situation, for example if they are married/in a civil partnership). In practice, IHT has now been around for a very long time and it's hard to see it going anywhere in the near future. The only question, therefore, is how much you will have to pay and this will, of course, depend on the value of your estate at the time of your death.

In both of these cases, using equity release can help to limit the amount of money you hand over to the government by reducing the value of your estate at the time of your move into permanent care or your death. You can then use this money as you wish, either to improve your lifestyle during your retirement or to give your children their inheritance early. If you live for another 7 years after giving the gift, there is no tax to pay and even if you don't, the tax may be applied at a reduced rate.



Dealing with existing debts

If you're still carrying debt into retirement, you may have concerns about your ability to pay them off and what might happen if you don't. Accessing equity release through a lifetime mortgage can give you a straightforward way to pay them off.



Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration.

For inheritance tax planning and estate planning, we act as introducers only

The FCA does not regulate some form of inheritance tax planning and estate planning