Nigel Hare Scott highlights how equity release can be used to meet client's needs in retirement
After retiring from the National Health Service, Miss Knight thought that she would be in a reasonable position to lead a quiet and financially problem free life. Unfortunately, things didn't quite work out the way Miss Knight planned. Not only did she have to cope with an "interest only" mortgage on her property, she also had to make her retirement income stretch to cover an expensive bank loan. This had been taken out mainly to cover exceptional and unforeseen expenses, such as much needed repairs to her property, the replacement of some very old and dilapidated appliances, plus her pet dog required urgent and expensive surgery. Miss Knight decided to explore other options for meeting her needs through equity release specialists Home & Capital Advisers. Given their experience and market knowledge, Home & Capital Advisers are ideally placed to help retired people in Miss Knight's situation.
Options and solutions
Having been contacted by Miss Knight, and hearing of her predicament, Home & Capital arranged an appointment to have their local representative visit her at home. During the meeting with the representative, Miss Knight's circumstances were reviewed and discussed at length. Her requirements were assessed in detail, because not only did she need enough money to cover the mortgage and bank loan, but she was also hoping to have enough left over for a "rainy day" fund. Her options were varied, and the merits and drawbacks of the different types of plan were explained in detail.
Miss Knight, aged 70, really needed to release enough money to achieve her objectives and at the same time leave her with an interest in her property for future use. She has no dependants so the need to protect a value for passing on to family members was not a necessity.
After reviewing the alternatives available for Miss Knight and exploring the differences between a lifetime mortgage and a home reversion plan, the best fit for Miss Knight was a home reversion plan because it allowed her to lock in some future value for her and at the same time release sufficient funds to meet her immediate needs. While a lifetime mortgage would have met her immediate requirements, there was a risk that the debt would have escalated and outstripped any future value in her property, which could have reduced her potential to release further monies.
Miss Knight decided to take out a partial home reversion plan - this was completed within nine weeks once the survey and application form had been completed. The home reversion plan allowed Miss Knight to take care of her immediate costs i.e. repaying the bank loan and mortgage, and it also enabled her to redecorate her house, and take some holidays, including a much-anticipated trip to Canada. She also still had some funds left for her "rainy day" fund.
- Nigel Hare Scott is managing director at Home & Capital Advisers Ltd.
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