Uses for Equity Release

It is easy to view equity release as something that people ask for and to act only on a reactionary basis. However, the purposes it can be used for a many and varied.

I would encourage you to look at the list below, which is by no means exhaustive, and consider this with your clients.

Equity Release tends to come in three broad categories –

1. Distress purchase – where a client needs the money to maintain their house or pay of unmanageable debts.
2. Lifestyle purchase – this is by far the largest category and can include:

• Home improvements – windows and conservatories are popular.
• Upsizing – equity release can be used in conjunction with a house purchase to enable a client to move into a more expensive property.
• Repay debts to improve disposable income
• Holidays – especially popular with clients who have relatives abroad where a month in Australia or Canada would be more than they could usually afford
• Maintaining quality of life – the most popular form of plan includes a drawdown facility where a client can meet their specific needs for capital now with a facility to drawdown further sum in the future on an ad-hoc basis

3. Altruistic purchase – for wealthier clients who want to make a living inheritance

• Inheritance tax planning – by gift or investment
• Gift to children to help them onto or up the property ladder
• Gift to grandchildren for university fees

The Mortgage Enabler

This should stand out to any IFA or Mortgage Broker who sometimes deals with first time buyers.

With high house prices, many prospective first time buyers find themselves adrift of getting onto the property ladder.

Equity release would enable their parents or grandparents to contribute.

There are always wider issues to consider, such as the parents’ own needs and fairness to other siblings.

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