Take, for instance, the interest-only conundrum that a considerable number of homeowners are now presented with. Many thousands of borrowers who are 50-plus find themselves looking at considerable shortfalls to be met when their interest-only mortgage term runs out.
The problem of underperforming endowments has not gone away plus we are only now finding out the extent of the issue for borrowers who have never put in place any kind of repayment vehicle.
Lenders are asking how older borrowers can afford to make their mortgage repayments into and beyond retirement, and many individuals are left with no answer.
This means that the lender will want their money at the end of the term and there are limited options available to borrowers to be able to do this. Here is where equity release can provide a real solution.
It will not be suitable for all however it is important to present equity release as a potential solution particularly to those who may believe they have no option but to sell their property, pay off the capital, and make do with the ‘leftovers’.
Clearly, a major concern is what could happen to them after the property is sold; where do they live then; can they afford to rent, etc?
By opting for equity release these questions are not under consideration as they hopefully get to pay off all their outstanding capital, and they get to stay in their home, rent-free, until they pass away or they move into care.
With products such as a home reversion, the individual can even guarantee a percentage of the property’s value is available to beneficiaries.
Again, it is up to advisers to ensure the equity release option is fully considered in such circumstances, which is why we hope all those not active in the sector are taking the time to partner up with specialists.
With interest-only mortgages near, or in retirement, the damage may appear to be already done however with the right advice and guidance the consequences for borrowers may not be as damaging as first thought.
Chris Prior is business development manager at Bridgewater Equity Release
