30 September 2020

Cascading wealth with a lifetime mortgage

Over 50s hold about three quarters of the nation’s housing wealth; this equates to more than £2.8 trillion in equity tied up in homes across the country.

It’s no surprise that the equity release market is the largest growing mortgage market in the UK in the last two years; with the number of customers looking for a lifetime mortgage growing by 20% over the last three years.

Untapped potential

Often, housing wealth exceeds that of someone’s pension. For clients looking to enjoy a little more cash in retirement, equity release offers untapped potential to access the money in their own home.

“You can’t take it with you”

Retirees are living longer into their golden years, enjoying longer life expectancies, and inheritance is being received much later in life. Recent figures from the Intergenerational Commission show the average age of inheritance is now 61. A lifetime mortgage allows parents to gift a “living inheritance” to their children and grandchildren. This means they can see their loved ones enjoy the benefits of extra cash while they’re still living. 

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A lifetime mortgage could be used to support families by helping:
Towards a wedding 
Towards a dream family holiday
With university and school fees 
Divorcing couples splitting their assets 
Towards a deposit for a first home 

A step up on the property ladder

With house deposits in the UK now averaging in at £33,127, first-time buyers are more dependant than ever on the Bank of Mum and Dad (BoMaD), with more than a third (34%) receiving financial help from a gift or loan from parents. In 2019, this average contribution from families and friends has skyrocketed by more than £6,000 to £24,100. 

The value of lending from generous parents will add up to around £6.3bn in 2019, effectively making the BoMaD the 11th largest mortgage lender in the UK. Using a lifetime mortgage can release equity to help family members pull together a deposit. The money could also help with some of the initial costs, like furnishing their new home, solicitor fees and removal costs.

A real life story: meet Gill and Jim

Gill and Jim have been married fifty-two years, and have lived in the same neighbourhood in Bristol for as long as they can both remember. They’re proud that their family have grown up around them and really value having their nearest and dearest in close proximity.

Their granddaughter was looking for a home close to her relatives, but simply could not afford the cost of a deposit in the South West with the rest of her family. Gill and Jim used a lifetime mortgage to release equity from their home in order to gift their granddaughter with a deposit.

Here's what Gill and Jim had to say:

“We really wanted our granddaughter to have the chance that we had. It’s a really, really nice feeling to be able to do something for her. Using the value of your house, to help your family - that’s what it’s all about. We’d rather see her happy now, then have it when we’re gone and we can’t see it. The hug I got from my granddaughter was well worth it.

Helping clients make the right decision

Lifetime mortgages are a growing market and can benefit clients and their families. Using the equity in their home, people can do more of the things they love, to help the people they love.

Your client should be made aware that if they gift money away, the recipient may have to pay inheritance tax in the future. It’s also important to remember that a lifetime mortgage creates a debt on the home. If your client has more affordable ways of borrowing available, these should be considered first.

We’re committed to helping advisers understand the role that lifetime mortgages can play in helping their clients and families make sound financial decisions so they can enjoy a more colourful retirement.

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