There was a time when Equity Release had a bad name, accused of creating more problems than it solved. But thanks partly to better regulation of the industry, an increasing number of people are looking at this way of generating much-needed cash later in life.
Plymouth solicitor Chloe Hamblin, who specialises in property matters at Curtis Whiteford Crocker, says she has noticed more and more people opting for this way of unlocking the value of their home.
“There was a time years ago when Equity Release had a bit of hype around it but it wasn’t regulated at all. It was just a mess,” says Chloe. “Now the Equity Release Council offers guidance and sets standards and the Financial Conduct Authority has regulated it more.
“One of the new requirements is that Mortgage Lenders ask that each client has independent legal representation. So it’s our job to make sure people have the capacity to make a decision and that they understand what they are doing.”
According to the Equity Release Council’s annual report, published in April, 2018 was a record year when its members helped nearly 83,000 customers to access £3.94bn of property wealth.
There are two kinds of Equity Release. You can either borrow against the value of your home or sell all or part of it in exchange for a lump sum or a regular monthly income. Some plans also give you an option to “draw down” further equity at a later date. The product is aimed at the over-55s and you need to have paid off your mortgage.
Chloe Hamblin says they are seeing more and more people opting to free up some of the value of their home. “The issue is that people are capital rich and cash poor. They have worked hard to pay off their mortgage and they have all their capital tied up in their home. The older generation don’t necessarily have much money in the bank and pensions are not increasing by much.
“People come to us through a financial adviser who will have access to the whole of the market. They might want money to do up their home, or make a gift to their children or grandchildren to help them get on the property ladder,” she says.
There are, of course, implications for the value of an estate and Chloe suggests families talk about the decision. “It’s always good to talk about it, and manage expectations. By the time they come to me they know all the options. It’s for me to give them independent legal advice and explain to them what will happen when they pass away.
“Equity Release is increasing in popularity, so you have to make sure you get advice on the law from someone who understands this complex product. I need to make sure clients fully understand what’s happening.”
Chloe Hamblin is a solicitor specialising in property at Curtis Whiteford Crocker which has offices in Plymouth (01752 204444), Tavistock (01822 617666) and Torpoint (01752 931004).