Using equity release to move home: a 'viable solution'

Using equity release to move home: a 'viable solution'
Credit: Anthony Devlin/Bloomberg

Equity release used to be seen as a last resort, and is often considered against downsizing.

Taking out a lifetime mortgage as a means of gifting a deposit is a well-known use – Legal & General says they saw a growing number of enquiries about how people can use their own property wealth to help loved ones secure their first home.

But over-55s are increasingly using equity release to help themselves move home, according to more2life.

Data from the lender found a 116 per cent rise year-on-year in people using equity release to buy a property. Its chief executive officer, Dave Harris, says many turned to equity release to boost their buying power.

Harris says that unlocking property wealth is a “viable solution” to helping retirees get the home they want. Some borrowers aged 55 or more may not pass the affordability checks for a residential or retirement interest only mortgage.

Laura Healy, a mortgage and equity release adviser at Fairview Financial, says she looks at the best option overall, and agrees that equity release is “most definitely” a viable solution.

Like more2life, Healy has seen an increase in enquiries about using equity release to purchase a property. “It’s not the largest area we deal in, but it's certainly on the rise,” she notes.

Healy recalls a client with a health condition who, with equity release, was able to purchase a property more suited to their needs, which ordinarily would have been outside of their budget.

“[Equity release] was hands down the best way to go for them. They do not have any children so were not one bit worried about the compound interest and equity erosion.

“Why not in this instance make your life comfortable? It was an easy decision for them,” she adds.

Martin Wade, a director at Access Equity Release whose advisers are authorised to consider residential mortgages as well, considers moving home as an equally legitimate motive to take out equity release compared to its more widely known uses.

“If you can release money to go on a world cruise, renovate or gift to children, then why shouldn’t you be able to harness your assets to move?” Wade asks.

“The purpose of equity release is to allow individuals who have amassed wealth in property to make that asset work in whichever way benefits them. Moving to a more suitable property or one that is perhaps geographically closer to family is a core need.”

While some may not be concerned about the possibility of roll-up interest eating away at their equity, David Forsdyke, head of later life finance at Knight Frank Finance, warns that borrowers need to ensure they enter into such arrangements with careful consideration of the future.