As part of my 60th year project to get my retirement finances sorted I thought I’d find out about Equity Release. What with all the bad press it’s something I’d only ever consider as a last resort to help both kids get properly on the housing ladder or maybe to fund a retirement property abroad.
It’s now one of the options available as part of the Nationwide Building Society’s ‘Later Life Borrowing Options’. I’ve been a Nationwide customer now for over 20 years and although I’ve had a a few issues with them I do, basically, trust them.
Suitably warned by the 1.77 million Google results I got from the words ‘equity release scam’ I firstly checked out the information about it in the branch. That took a while as they don’t actually call it ‘Equity Release’ instead it’s ‘Lifetime Mortgage’ which they promote as part of their ‘later life borrowing options’ package.
In this general leaflet they describe it is “a type of equity release that lets you unlock the value in your home as a tax free lump sum of money.
“Equity release is essentially like a long term loan. However, you don’t have to make monthly payments, unless you choose to, and the loan is usually repaid when the last borrower moves into long term care or dies. The maximum loan amount depends on your age and how much your property is worth.”
Friendly mortgage advisor
That’s fair enough, I guess, but how much can you borrow and on what basis and I don’t like the sound of the word “usually”. I needed more information so there was nothing else for it, I just had to fix a meeting with one of their mortgage advisors.
To be fair he was friendly and not in the least bit salesy but getting straight answers out of him was near impossible. All he wanted to do was to book me for a consultation where they go through details such as income, pension, outgoings etc. which I really didn’t want to get into as this was just a basic fact-find.
Eventually after much pressing he said that I could only borrow 20% of my home’s value at the age of 60 though that percentage would increase as I get older. He couldn’t confirm the interest rate I’d pay on the loan but it certainly wouldn’t be punitive, probably only a couple one or two percent more than base rate. Oh, and there was no ‘usually’ about it, it would only be paid off in the event of death. Twenty percent’s not a lot but the interest rate and terms sound fair enough.
The big problem though came next, and was only mentioned in passing. They wouldn’t lend to me if I had savings which would need to be spent first on whatever I wanted the loan for.
When you’re approaching retirement a reasonable level of savings provide comfort in case you need to dip into them to support your income in later life. After all you don’t know how long you’re going to live and what’s round the corner.
The last thing you want to do is spend all your savings and then take out a risky potentially long-term equity release loan against your property.
At the end of it all I was left wondering in what circumstances anyone would ever take the risk of a lifetime mortgage even with a relatively trusted name like Nationwide.
Thanks for this fact finding. I can see this lifetime mortgage might be helpful if one half of a couple needs money for care and all the savings had been spent. It is hard to predict the future and although we are aiming to spend everything before we die, we don’t really know if we will need to pay for care or not.