Winseer:
^^^It isn’t a coincidence that applications for “Equity Release” aka “Whole-of-life Mortgages” are going through the roof now…
Picture this:
You’re already retired, or about to retire
You’ve long since paid off your mortgage
Your house is worth around £600k
You cannot pass it onto your kids, either because you don’t have any, or because you are unlikely to survive another 7 years “as you are” to gift the property over in time.Your pension payout was rubbish, and it turns out your “enhanced state pension” - doesn’t actually materialize, as you spent 18 months “off book” (not paying National Insurance Stamp) during your past working life, which disqualifies you from the enhancement…
So… What to do?
If you take out credit - it’ll be at a high rate of interest.
You won’t be able to take out a normal second mortgage, because of your low income, and age.Thus, equity release schemes (which I personally dislike btw) allow people to effectively sell the house they live in, and then continue to live in it for the rest of their days…
If “care” is ever needed, the house belongs to the bank, and not the oldsters any more, so there’s no £86,000 to be taken away from anything, and any such “care” is thus free.
…Now to make that equity release income “disappear” as well…
The maximum amount loaned is well under 50% of the value so it’s not ‘selling the house’ as such.
It’s just a part remortgage which hopefully won’t be due for repayment before death.
It’s all just a reflection of an over supplied labour market and profits based on raiding wage provisions, which by default means low incomes for retirement funding and older workers having to compete with younger ones for the easy jobs most suited to older workers.
Combined with the laughable propaganda that we’re all supposedly living longer resulting in at best equally laughable pension payouts.Or at worse being ripped off by the state pension system by increasing an already too high pension age which many won’t live to see or won’t live long after.
In that environment taking on a ‘lifetime mortgage’ if you have a suitable property is more a case of necessity not choice.
The choice being using that to provide essential cash to live, which a decent pension provision should be paying and while you’re still around to spend it.
Or if not at worse bankruptcy in which you’ll lose the property anyway or have to downsize into a small hovel just delaying the bankruptcy for the privilege.
While at best in my case there are no offsring to leave it to and whichever distant surviving releatives might have shared it will probably lose a lot of it to inheritance tax anyway.Either that or the care cost scandal could get it.
Basically I’m only surviving financially because of that legacy left to me by my late parents who lived through better days and the lifetime mortgage option wasn’t an easy one to make.
But far better than the alternative of being over 60 at the mercy of Jobseekers Universal Credit and waiting for the state pension date which would never have arrived in time, or have been enough.
Which would have made that legacy moot.
As it stands it’s a win win situation because whatever I leave as an inheritance is irrelevant especially in an inheritance hostile tax and care costs environment.
While if I didn’t remortgage the place on a lifetime basis I’d just be wrecking my own remaining financial future to the point of losing it all which isn’t what my Parents worked for.It’s a no brainer.
The truth is it’s just a symptom of a rigged labour market combined with an equally rigged pension system.Workers should be retired on a decent pension by the age of 60 not raiding hard earned property equity to survive.
On that note it’s more likely that those born after 1955 will be relying on what their parents left them from the better years than having a paid for house of their own.
With many of around my generation, including some relatives, facing retirement mostly reliant on state pension and in the rented sector.I count myself lucky in that regard.