Help your clients unlock their property’s potential with equity release

Sadly, property ages with us. Decoration goes out of date, furniture becomes old fashioned, and the latest technology changes the way we use our living spaces. Hand in hand with this, is a shift in attitudes among homeowners who are now looking for more open plan living, with many seeking to remove walls and create more contemporary spaces at home.

Knight Frank Finance has helped a large number of clients raise the funds they need for home improvements, without depleting savings or impacting on their current income. For those over 55, a lifetime mortgage or a retirement interest-only mortgage are popular choices. Interest rates on these types of borrowing have fallen dramatically in the last few years.

How it works in practice: a simple scenario

A couple in their 70s approached Knight Frank Finance, seeking a way to clear their existing ￡300,000 interest only mortgage on their ￡2 million property, and raise an additional ￡130,000 for some major renovations. They had been winding down their careers over the last few years and were ready to fully retire, which meant their income was about to decrease. So, at the same time as remortgaging, they had a desire to reduce their outgoings.

The solution

Knight Frank Finance arranged a lifetime mortgage for a lump sum of ￡430,000 at the outset, with a further ￡70,000 available through a drawdown facility should they need funds in the future or require contingency on top of their initial budget for the improvements.

With the initial ￡430,000 they were able to repay their existing mortgage (￡300,000) and unlock funds for the works (￡130,000). They chose to allow the interest on their lifetime mortgage to roll-up, so they no longer had monthly payments to worry about. Not only were they able to repay the original mortgage and raise the funds they needed, this also reduced their regular outgoings.

The advantages go further. We estimate the improvements they are making to their property will add around 10%, or ￡200,000, to the value of their home. Taking a lifetime mortgage was therefore a strategic move, as the interest won’t roll up to the level of ￡200,000 for around 14 years (with interest compounding, the mortgage balance will reach approximately ￡623,000 by the 14th year). As such, borrowing and investing to improve your home using a lifetime mortgage can be a financially-sound decision.

So how do you help your clients unlock this potential? Talk to the Later Life Finance team at Knight Frank Finance. We’ve already helped a number of professional firms by supporting and complimenting their services, and we would be happy to help you too.

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David Forsdyke runs the Later Life Finance team at Knight Frank Finance. David previously worked for the FCA and has established himself as an expert in the Equity Release market, and continues to support the work of the Equity Release Council alongside his day job. If you would like to talk to David or a member of his expert team, please get in touch by email [email protected] or call 01483 947764.

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Photo by Sieuwert Otterloo on Unsplash