More Scots cash in on the value of their home
Equity release schemes are a popular way to unlock property wealth, says Peter Boyd
The way that we Scots think about our homes is changing – and changing for the good.
Yes, we still have no desire to hold back on the dream of home ownership, but what we do once we own a property outright is on something of a revolution.
The Holy Grail for many homeowners is to enjoy a comfortable retirement in the home they have worked hard to keep, and to make their loved ones’ journey into ownership that little bit easier.
However, even when a mortgage has been cleared, it’s often the case that most people start to worry about how they can maintain their lifestyle or have more than a passing thought on affording care in older life.
Step forward an ever-growing number of Scots who have realised that there is a way to unlock previously hidden property wealth.
Plans for equity release in Scotland, where homeowners can cash in, tax free, on the value of their properties while maintaining ownership, have increased almost 40 per cent year-on-year. This equates to some £21.6million worth of cash.
With an average release value of £42,379, savvy owners are taking the opportunity to make the most of wealth amassed over the years in a number of different ways.
Holidays and home and garden improvements feature highly on the list of spending options.
However, 22 per cent of owners in 2016 said they had opened up the ‘Bank of Mum and Dad or Grandad/ma’ and passed cash onto family and friends to help give them a leg up onto the property ladder. Across the UK there were 8604 new equity release plans in the first quarter of this year – up hugely on the 2016 figure. That’s £663.3million released with the potential to transform the lives of families everywhere.
This suggests equity release – thanks to welcome changes in regulation to improve the previous poor reputation, the introduction of product safeguards, and the need to meet face-to-face with an independent solicitor – is here to stay.
For example, the ‘no negative equity’ guarantee means that the amount to be paid back to the lender can be no more than the sale price achieved for the house. There is no question of the homeowner or their beneficiaries being asked to make up any shortfall. Even if the house goes into negative equity during the period of the loan, they can stay in the house for as long as necessary, secure in the knowledge that the house will be sold to pay back the loan and nothing more can be claimed.
The reality is that anyone who owns a home bought with a mortgage has effectively been ‘saving’ throughout their lives.
It’s that crucial mindset switch which is fuelling the change in the way we look at property ownership in Scotland. People are now realising that the house they live in is a potential source of income in older life – and that wealth can be unlocked.
Many of us have been saving for decades whether we realise it or not. Equity release can be an unforeseen reward for that hard work. ● Peter Boyd is the managing director of Boyd Legal.