The mortgage market has finally realised that people are living for longer and the majority of property owners are asset rich and cash poor, and likely to lose out at the older end of the market to Equity Release, which has seen a huge surge over recent years.
After the early horrors of the early Equity Release products, the current offerings are clear, comprehensive but expensive.
Smaller specialist mortgage lenders have been prepared after the last financial crisis to lend to older borrowers but now the mainstream lenders have entered that older borrower market.
The Nationwide are prepared to lender BTL investors up to the age of 105, and The Halifax will lend to residential borrowers up to the age of 85 years.
Young people now fully expect to have a mortgage during their working lives and into retirement and so the mortgage market had to react to this and dispense with their ageist policies of refusing to lend after 65 years of age.
What is the best choice - Mortgage (mortgage extension) or Equity Release?
Equity Release, as we have already said is undoubtedly more expensive but it prevents repossession of the property. The ER borrower remains in the property until death or removal to a Care Home.
There is also the 'no negative equity guarantee'; i.e. that a borrower cannot owe more than the value of the property.
The huge increase in negative equity is used by borrowers to: assist family to get onto the property market; pay for grandchildren’s university education; meet the cost of home adaptations so that the borrowers can remain in their homes or to pay off existing debts There also remains the issues of potential beneficiaries, many of whom are shocked to learn after probate that their parents have obtained Equity Release against the family home, often the main asset. It's best to ensure that all potential beneficiaries are made aware, in writing, of your ER intentions before you go ahead.
If on the other hand you have an income in retirement it would be cheaper to mortgage or extend a mortgage but there always remains the threat of repossession should you default.
