Home reversion specialists Bridgewater indicated that advisers would offer the best equity release option for the client’s needs, but needed to look at the current market conditions and future changes.
As both lifetime mortgages and home reversion plans are affected by market conditions and house prices in general, advisers have been encouraged to ensure that when clients want to release equity they are aware of the risks in lifetime mortgages and the security of reversion plans.
The release of a 50 per cent share could see the remaining value of a £250,000 home drop into a negative value should house prices within 20 years on a loan rate of 6.5 per cent. Though should house prices triples, the amount remaining could be worth in excess of £500,000. As low or negative inflation can erode the value, the client can end up worse off and facing loan repayments.
Andrew Dixon, marketing and sales manager at Bridgewater Equity Release, commented: “It is up to the customer to decide what they want to release, if they want to sell 100 per cent of the value they can, but the flexibility options means if they want more cash they can get it. It is their equity so it is up to them to tell us what they want, as even if house prices fall they still own the house. With home reversions it is a simple sale and purchase and they retain whatever they don’t sell so there is always a return on their estate.”
Daren Carter, managing director of In Retirement Services, said; “Risk is what advisors do and need to ensure customers that understand what they are taking out to keep in line with SHIP and FSA regulations.”
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