HEARTS, MINDS AND EQUITY RELEASE

TODAY’S BLOG

EQUITY RELEASE SURGE

A surge in homeowners looking to free up cash from their properties propelled the figure for equity release to £1.05bn in the three months to the end of September, driven by high house prices, gifts to family members and uncertainty induced by the coronavirus pandemic. The value of equity released jumped by nearly one-fifth from £884m in the third quarter of 2020.

While the number of loans taken out was slightly down year on year, the average amount of housing wealth freed up was 23% higher, at £101,593 per borrower. Data published this month by one of the main equity release providers (Key) suggested many borrowers were taking advantage of recent house price gains to help family members climb the housing ladder. “Big-ticket items” such as debt management and gifting were behind nearly two-thirds of the equity released in the third quarter. More than two-fifths (42%) of the cash given to family and friends was used for house deposits.

For homeowners over the age of 55, equity release offers a way of unlocking the value of their properties, whether for home improvements, paying off other debts or to help family members. Interest on the loan is paid through the sale of the house at the end of the term, so unlike a conventional mortgage a borrower is not required to demonstrate a minimum level of income to qualify. Interest rates are higher for these “lifetime mortgages” than for most mainstream mortgages. Interest rates are low by historic terms, but equity release is a not straight-forward.

Hearts, Minds and Equity Release

THE POWER OF COMPOUNDING INTEREST

Equity release is not like a normal mortgage, repaid over a set time. It is generally a loan which is only repaid when the property is sold. Overall, no payments are made, the interest merely compounds. By now you know the miracle of compounding interest – which works wonderfully for your investments and does precisely the opposite for your debt.

The risks you need to consider are future interest rates, the future value of your home and how long you will live or anyone else that you share it with. The earlier you release equity, the bigger your total debt in the end. Admittedly this helps reduce the value of an estate for inheritance tax, but in practice it can simply mean that there is nothing to inherit.

Some of you may remember the significant property crash in the late 1980s. At the time equity release was very popular and many people got caught out by the reduced value in their home and the increasing interest rates. All conspired to create genuine stress and financial hardship for some. There have been reforms, but I would urge caution – a lot of it. This should always be considered in the context of your total financial planning, not simply a desire to help a family member.

We do not provide advice about equity release but can refer you to a specialist. However, you should exercise great caution and have a clear plan and reason about why you want the funds. Interest rates are normally higher than a typical mortgage. The fact that around half of those using equity release are between 65 and 74 does not bode well for those that may live for 2 or 3 decades.

As ever, good financial management starts with good budgeting and a proper plan.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

HEARTS, MINDS AND EQUITY RELEASE2023-12-01T12:12:59+00:00

I CARE A LOT

TODAY’S BLOG

I CARE A LOT

Many of us have been under something akin to house arrest over the last year. One of the recent movies that you may have come across on your media platform is “I Care A Lot”. Why am I writing about film again? Well, it’s a pertinent story, here is why…

RESIDENTIAL CARE

Many of us may have to contemplate Residential Care for ourselves or our loved ones. I have very few clients that relish this prospect. Most prefer to stay in their own home for as long as possible, retaining their independence and dignity as they see it. Most people will therefore be likely to only find themselves in care if a life, lived at home is not really possible. The cost of residential care can be significant, the weekly fees can be eye-watering and probably far exceed any weekly that you have achieved in your entire lifetime. Those of you that have faced this already will know this already.

THE LETTER OF THE LAW

The basic plot of the movie “I Care A Lot” sees lawyer Marla Grayson (Rosamund Pike) present the façade of caring for people in this predicament. She is using the law to imprison people in a care facility and then take over managing their assets making a fortune in fees in the process.

She abuses the system, fools the judiciary, bribes the medics, funds the care home managers and manipulates her way to a fortune. The first 30 minutes of the movie had my blood boiling as she serenely executes her targeted imprisonment of Jennifer Peterson, (Dianne Wiest) someone that is clearly able to look after herself and is well resourced. In a courtroom Marla’s arguments are well rehearsed, tried, tested and watertight – they seem reasonable. “You can’t care for someone by doing what they want. You have to do what they need and I can care better than a family member.” We suspect and the court knows that this is sadly often the case. We are left to face the uncomfortable truth that we can see the legal point, even if its wrong.Sadly, this part of the film is alarmingly believable, later elements are not, but I will leave those for you to discover.

SOLOMONS BLOG I CARE A LOT MARLA - ROSAMUND PIKE

TAKING CONTROL

In the UK having Power of Attorney can or should ensure that this sort of abuse of power cannot happen. Whenever the State is permitted to step in, there will always be strings attached and likely little contextual thinking as the State is an institution, designed for box-ticking and box sorting to answer bigger questions of taxation rather than the nuances of individuality.

Having a Will and Power of Attorney drawn up properly and discussed with the people you intend to hold positions of responsibility (Attorney, Executor or Trustee) is a fundamental task of good financial planning for the future.

TRUSTED ADVISERS

We might all want professionals to be trustworthy, but we know that they are simply people and have their own pressures. Money is a sure way to attract the wrong people and illicit the worst responses from them. As also developed in the excellent six-part mini-series “Behind Her Eyes” starring Simona Brown, Eve Hewson and Tom Bateman (also on Netflix).

TAKING INITIATIVE, PLANNING AHEAD

Last week I took on a very bright new client who has given this much thought. Perfectly capable today, but with a clear appreciation that the day may come when that is no longer the case, and perhaps (probably) “I wouldn’t even know”. Your planning should be designed to give you peace of mind, not anxiety. The great difficulty is finding someone in whom you can place a high degree of trust. Following the law does not demonstrate trust, clarifying, documenting and understanding your own expectations is, which is why reviewing and checking progress with you each year is so important. A year ago, few would have considered the challenges that we have faced together. They have presented tests for our values and hopes. Have you kept us up to date with any changes to yours?

For a dramatic way to grab your attention, here are the trailers for the movie and the series mentioned.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

I CARE A LOT2023-12-01T12:13:09+00:00
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