08 December 2021

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.

With this in mind, it’s no surprise that equity release lending is expected to exceed £4bn for the first time, by the end of 2021.

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, 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. 

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 £57,278, first-time buyers are more dependant than ever on the Bank of Mum and Dad (BoMaD), with more than 50% of under 35's receiving a gift or loan from parents. In 2020, this average contribution from families and friends was almost £20,000.

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 John and June

John and June have lived in the same village for 30 years and are deeply rooted in their community. This is one of the many reasons why downsizing or moving didn’t hold any appeal.

John and June instead used a lifetime mortgage to support their family; by helping their youngest child buy a place to live nearby after their divorce. This gave them the added bonus of being able to spend more time with their granddaughter.

Here's what John and June had to say:

"Our children will get our money when we die, but that’s not the time they really need it. They need it now, when there are bills coming through the door and their own children to bring up. This is the best use we can make of the benefits we have gained of being able to buy a house like this back in 1991."

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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