How does Equity Release Work?

Below you will find some real-life clients we have helped..

Case No. 1

Mrs A is in her early 70s and she had continued to work since retirement as a shop assistant.  She is a very active lady and had no difficulty with the demands that this job made upon her.  She wanted the job not only for the benefit of having an outside interest but also the income it gave her which supplemented her state pension.  Unfortunately the lease on the premises came to an end and the business had to cease trading and she was out of work but still needing to supplement her state pension.

This where the value of equity release came to her aid and she was able to utilise the value of her £400,000 property to set up an equity release plan which would give her what she needed when she needed it.  Her first release of funds was £10,000 which was the minimum initial tranche of money that lenders were happy to advance.  In future years she would probably only need £4,000 - £5,000 and she could draw down that amount as and when she needed it and the amounts that she could draw could be as low as £2,000 at a time.  In setting up a scheme of this nature where the amounts given to Mrs A were relatively low compared to the value of her house the debt for the equity release draw down that is charged against her house would not make a major impact on the value of her estate that she wished to leave to her family but at the same time it gave Mrs A tremendous peace of mind as she knew she had financial security without risking her children’s inheritance and this is because historically house prices have kept pace and, in certain areas, more than kept pace with the cost of the equity release draw down.  For Mrs A, the moral of the tale is to only take what you need when you need it as this is what makes you the happiest of all and it certainly made her very happy.

Case No. 2

Mr & Mrs F were both aged 70 and Mrs F had been retired for a number of years while Mr F had only been retired for a couple of years.  Unfortunately, they had not adjusted their lifestyles to fit in with their pension income which included state pensions and personal pensions and so started living off their credit cards and in the end they were using one credit card to pay the monthly interest costs of another credit card and the problem compounded.  During their working lives they were good risks and had a number of credit cards with sizeable facilities for credit upon them.  It had got to the stage where the credit cards were maxed out and it was necessary to discuss with the credit card companies a moratorium on payments until such time as funds could be raised to eliminate the debt.

Fortunately, Mr & Mrs F had an unencumbered freehold property worth some £500,000.  It was relatively straightforward to arrange a lifetime mortgage equity release plan for £60,000 to clear all their debts, enable them to live within their pension income which was not unreasonable and, most importantly, give them peace of mind.