Let your home look after you

Many people in the UK who are approaching, or are already in retirement, have an insufficient pension pot to fund the lifestyle they want in retirement .

This can be down to needing to draw on savings historically, or perhaps lower than expected
investment return.

And yet those same people who may think there isn’t a solution actually already have one that
they don’t know about - because it is a more common phenomenon that those same people
have significant equity tied up in their properties that can be made available to
help in exactly this way through equity release.

The lowdown

Equity release is a way to unlock cash that is tied up in your home as equity,without needing to move, and it is available to over 55s.

You can either take a cash lump sum or an income, or you agree a maximum available pot that you can withdraw money from as and when you need it.

There are two main types of equity release scheme:

·        A lender will give you what's called a lifetime mortgage, where the interest is paid during
or after the property is sold.

·        A home reversion scheme is where the equity release provider will either buy all (or a
portion) of your home for a cash sum and you can live there rent-free for as
long as you choose.

What can you use the money for?

When you release equity you are free to spend the money on pretty much whatever
you like – be it perhaps to clear an existing mortgage, create a lump sum to generate income, a gift to a family member  to perhaps help with a property purchase, or to buy that Harley you’ve always wanted !

Pros and cons

Any plan taken out will have an impact on the inheritance you leave to your loved ones, so that’s why it is important to take the right advice so as fully understand the implications of any scheme you sign up to.

The benefits of releasing equity though are significant -

• Access cash that was previously tied up in your home
• You don't have to move area or downsize to access this money
• You get to stay in your home for as long as you want
• Option to pay nothing until after your death (or if you move into long-term care
  and the property is sold)
• Use the money to fund your retirement, to gift to your family or for any other
  purpose.

When you take advice , the types of areas that will be discussed will be  -

• With a home reversion plan the provider will own a portion of your home, and will
  receive that portion of the proceeds when the property is sold
• With a lifetime mortgage, the proceeds of the sale of your home will need to
  cover the mortgage owing ( although providers protect the estate with a 'no-negative-equity-guarantee'.
• It will reduce the amount left to your family or others when you die.
• Funds released can affect any means tested state benefits that are received.

Get the right advice

It is essential therefore that you think carefully about an equity release scheme by taking expert independent financial advice.

In addition you should take separate independent legal advice.

Talk to your family

And while it isn't compulsory, it is recommended that you speak to your children or the other beneficiaries of your will to inform them of your decision and the impact it will have on them in the future.

What protection do I have?

The majority of providers now adhere to the highest standards through their membership of the trade body, SHIP.

Safe Home Income Plans (SHIP) ensures its members' products have a number of customer safeguards built into their plans. These include a guarantee that you can live in your home for as long as you choose, that you can move home if your circumstances change, a 'no negative equity' guarantee and, importantly, that you're entitled to independent legal advice.

There is no doubt that more of us will turn to equity release as a means of funding our retirement in the years to come – the mammoth pensions gap makes this inevitable, but with the right advice, it isn’t something that should be feared.

For many years you have looked after your home - perhaps it is now time for your home to look after you.

If you did want to find out more about this, please feel free to get in touch with me at -  

mark@themortgagemonkey.co.uk

Thanks for your attention

Base Rate to rise in Spring of 2015

Base rate is likely to rise next spring, Monetary Policy Committee member
Martin Weale said today.

Speaking to Sky News Weale said once base rate rises, further increases
will be gradual.

He says: “I think it is very helpful that we try and explain the most
likely path for interest rates that the first rise will come perhaps in the
spring of next year, and then the path is likely to be relatively gradual.”

In the latest MPC’s minutes, published earlier this week the committee said
base rate is likely to be “materially” below the 5 per cent average set by the
Bank of England prior to the crisis in the coming years – even when the economy recovers.

Since August, the Bank of England has sought to give consumers an
indication of when base rate is going to rise through a policy of forward
guidance.

It stated that base rate would not increase until unemployment dipped below
7 per cent or there was an unexpected spike in inflation.

However, earlier this month, Carney changed how the bank uses forward
guidance  just six months after first
introducing the policy to the UK. Although he maintains the policy has worked
so far.

The overhaul of forward guidance sees the direct link with employment
dropped so the BoE can focus on a much wider range of indicators focusing on
absorbing all of the spare capacity in the economy. This will see the Bank
publish forecasts of 18 more economic indicators for the first time.

As well as unemployment, the MPC will monitor factors such as participation
in the labour market, average hours worked and the extent of involuntary
part-time working, surveys of spare capacity in companies, labour productivity
and wages.