The Bower team are chatting face to face with customers every day and have acquired a vast amount of knowledge and experience when it comes to understanding the reasons behind each clients’ choice in releasing equity.
We asked our advisers what the top reasons their clients gave for needing the funds were. So based on real life customers, with real life needs, we’re sharing with you the top five reasons.
01 Get the lump sum you want
When in retirement it can often be hard to get access to funds via a standard loan or by re-mortgaging as these products have terms that require you to cover monthly re-payments which you may not be able to commit to while on a pension income.
We found that one of the main reasons our clients chose to release equity was to access a lump sum with no monthly commitments. It allows them to spend the money the way they want with a personalised plan to suit their needs and requirements, and is tailored so it’s right for them.
02 Help your family out the way you want
Nowadays it’s proving very difficult for the younger generation to make it onto the property ladder without a little boost from the “bank of mum and dad.” But many people don’t have that amount of money laying around and feel helpless.
From speaking with our advisers, we’ve found that clients want to support their children and look for ways to raise the cash and one solution they seek advice on is equity release. Releasing funds from your home allows you to gift cash to your children so you can set them up for life, while still being around to see them enjoy it.
Our adviser Gordon, tells us about his client who wanted funds for this exact reason,
I’ve got someone who wants to pay off their children’s student loan in order to make them more attractive to get a mortgage and also provide a deposit on the home.
Gordon, Equity Release Specialist
Many advisers stated that gifting money to children was a common reason for releasing equity amongst their clients. Bower’s Customer Services Specialist, Chris, told us that he’s found some customers want to gift money to also save on inheritance tax later on. We asked him what else parents give their children money for. Chris explained:
I find it’s normally to either get on the property ladder or it’s to help with a messy break up. Normally it’s a case where their child has either had a divorce or they’ve broken up with their partner and the house is being split down the middle so they’ll give them the money to help them.
Chris, Customer Services Specialist
03 Get the home improvements you want
Another reason why people choose to access funds from their house is to actually re-invest in their property by carrying out home improvements. Many people don’t want to down size to be able to get their dream house. They just want to be able to access funds so they are able to maintain the home they currently live in. Whether that’s by improving and generally maintaining the property or perhaps building an extension, as quite often these days, adult children are living with their parents until a lot later due to rising house prices which requires the extra space.
Chris agreed that home improvements was a popular reason and told us that people normally want the money for a new a kitchens and bathrooms, or to turn their bathroom into a wet room so it’s more practical for people as they get older.
Gordon told us about a few of his previous experiences with clients who wanted the funds for such projects,
One lady had her property built herself in 1998 and she wants to maintain it, she doesn’t want it to fall behind in terms of maintenance. Another client needed a mortgage so he could finish off his house and finish off an extension on the kitchen, he didn’t need a lot, he needed it as a facility to finish it all off and he’s going to pay it off over time.
Gordon, Equity Release Specialist
04 Go debt or mortgage free the way you want
Many people go into retirement with outstanding debts such as loans, credit cards and unpaid mortgages. With their monthly income reducing it can sometimes be a struggle to make the monthly payments.
Releasing cash from their property enables them to clear these debts and get rid of financial stress in retirement. Equity release plans can be set up with no monthly repayments to allow you to enjoy a more relaxed retirement as the money is only repayable when the property is sold or when you pass away. Chris says he feels that using equity release to clear outstanding mortgages is the top reason for needing funds amongst his clients.
Ed adds:
With interest only mortgages, people are not necessarily not wanting to pay anything but their lender won’t extend. So we can look at actually allowing them to continue borrowing and continue making payments but just replacing what they’ve got with a suitable plan which, firstly has an interest rate that won’t ever change.
So on a fixed pension income they can budget and know exactly what they’re payments are going to be and be able to treat it like an interest only mortgage if they want to, but with an open ended term so they’ll never have to get the point where a lender rings them up and says we need that money back now.
Also, they’ve got the security of knowing it will run for as long as it needs to and that if anything happens to one of them or a change of circumstances they haven’t got to keep making those payments, they’ve got the flexibility.
Ed, Equity Release Specialist
One of Gordon’s clients’ needed the lifeline that Bower could offer them.
I’ve got a man who’s bank are insisting he pays back his interest only mortgage which he’s never defaulted on and in fact, most months he makes an over payment. But they’ve forced him to put his country house on the market and we basically replaced it with a lifetime mortgage that is almost an identical product to what his bank gave him.
Gordon, Equity Release Specialist
Gordon mentions that it’s not only outstanding mortgages that people need the funds for, it can be any form of debt that people need to clear.
You’ve got your debt consolidation where they’ve allowed their credit cards and unsecured loans to roll up to a level where they’re not able to spend money because their spending it all on debt.
Gordon, Equity Release Specialist
It seems that people are using equity release as the lifeline they need in retirement, to allow them to manage their debts and still live the life they desire.
05 Live your life the way you want
Retirement is often portrayed by happy people who no longer have to work. Showing them enjoying luxury cruises in the sun, playing a round of golf and living in their dream house by the sea. But for many this is far from the truth. The dream of this relaxed, promised life after work is often shattered by the reality of financial struggles in later life. Many are asset rich but cash poor, meaning they have money tied up in property with no cash to spend on the life they deserve.
This leads us to our final reason why clients contact Bower. We found that many people wanted cash from equity release to access the funds tied up in their “bricks and mortar” to spend on the life they desired and deserve in retirement. With the option to spend the money on whatever they like to improve their life in retirement it really does seem a viable option and our advisers tell us what people are spending their money on! Holidays, cars, cruises…
Perhaps a second home, like one of Chris clients,
Another reason why they would do equity release is to pay towards another property. So some people who have high value properties can sometime release large amounts so they’ll buy another property with the release.
Chris, Customer Services Specialist
But it doesn’t have to be for dreaming big. Gordon says that some people just need a top up on their monthly income to be able to enjoy their life again.
People that just simply are not leading the retirement lifestyle that they desire. Their having to skimp and scrape and really haven’t got the spare money to get together to go on holiday and are having a thoroughly miserable time
Gordon, Equity Release Specialist
Our adviser Ed confirms that the funds really can be spent on anything!
I’ve done plans for prosthetic limbs, new teeth… you name it!
Ed, Equity Release Specialist
Summary
As you can see, equity release gives you the flexibility to spend your funds the way you want. Bower advisers will always take into account your individual needs and requirements. They’ll listen to your personal reasons for wanting to release equity so they can advise you and help find a product that’s right you. As our advisers rightly say,
We don’t provide products, we provide solutions
Gordon, Equity Release Specialist
Home reversion plans and lifetime mortgages are complex products. To understand the features and risks, ask for a personalised illustration.
