Equity loan release Case Studies

Case study 1: Draw-down equity loan

Mr W approached the Help the Aged Equity Release Service as he had to carry out some improvements on the property that he had lived in for 30 years.At the age of 62 he did not wish to move away from the area, nor was he keen to move to a smaller property at this time.

Mr W was in receipt of means-tested benefits and, though on a low income, was able to manage his expenditure on a day-to-day basis. But with little in savings, he could not raise sufficient capital to pay for the home improvements needed. The Service was firstly able to check that Mr W was receiving his correct entitlement to benefits and, before considering an equity loan scheme, ensure that he had explored the possibility of a local authority grant to pay for the work. In his case the local authority was unable to assist. After obtaining accurate estimates for the proposed works, the Help the Aged Equity Release Service was able to recommend and arrange a lifetime mortgage draw-down loan plan that enabled Mr W to draw sufficient funds to cover the costs of all the improvements he needed to undertake and also to have a ‘reserve’ account set up for future unforeseen expenditure. A valuation was arranged through the Service, without charge – an additional benefit to Mr W.

With his property currently valued at £120,000, the maximum facility that could be arranged at the time of application was £30,000, representing 25 per cent of the property value. With the improvements and setting-up costs amounting to £15,000, this ensured that Mr W had the remaining balance of £15,000 in a cash reserve account which was available to him in the future free of interest until he chose to draw on any of the funds. By taking this option Mr W was able to ensure he did not jeopardise his means-tested benefits, as he kept his savings level below £6,000, and future expenditure could also be controlled. Mr W was able to rewire his property and update his kitchen and bathroom, which gave him improved living conditions as well as increasing the value of his property.

Case study 2: Lump sum

Mr and Mrs S had holidayed in the Greek Islands for many years and set their hearts on a holiday home there to both enable themto enjoy longer winter breaks in the sun and to take advantage of what they believed to be a rising property market.Though living comfortably on their pension income, they were not in a position to raise the level of capital needed to purchase overseas, to cover the costs incurred and to furnish the new property.

Mr and Mrs S approached the Help the Aged Equity Release Service for advice.The couple owned their own home outright and hadseen a significant increase in value over the 20 years that they had lived there.They did not wish to downsize at this stage in their lives and were not going to be entitled to any means-tested benefits. Their children were aware of their plans, were not going to be disadvantaged and would also have use of the holiday home. The Service was able to source from all the lenders available the most suitable product for the couple’s personal needs, taking into account the need to ensure the lowest possible interest rate and the potential of future income from renting out the holiday home and a likely inheritance.A lifetime mortgage that allowed for future flexibility was recommended to secure the amount of money required.

Case study 3: Home reversion scheme.

Mr R is 67 years old and lives alone in his own property, which is worth £200,000. Mr R approached the Help the Aged Equity Release Service for assistance as he found that he was living beyond his means due to debts that had accrued over the years. He also wanted to raise enough money in addition to renovate and refurnish his home as well as giving him a little in the bank for a rainy day and holidays. The Service verified that the state and private pensions he received made Mr R ineligible for any means-tested benefits. He had considered the option of moving to a smaller property but had been unable to find anywhere suitable within the area and preferred to remain where he was for as long as he could.

In terms of an equity release loan, he was uncomfortable with the interest rolling up in a lifetime mortgage option and also wanted the option to raise further monies without any restrictive timescales. He had no immediate family to consider in connection with the inheritance of his estate and he agreed with his brother that the home reversion scheme recommended by the service was the most suitable option for him. Following discussions with an adviser allocated to his case, it was identified that Mr R had some health problems, including diabetes. With this information the Service was able to recommend a home reversion company that would lend a higher proportion for the percentage of property sold, which helped him further.

By selling less than half his property Mr R was able to raise sufficient to repay all his debts, which then meant that he was able to stay in the home he had lived in for over 24 years and have a monthly income that would easily meet all his outgoings.The additional funds were sufficient to pay for the much-needed home repairs and renovation required, which he had previously been unable to afford, and there was enough left for an emergency fund and a holiday – which had also, previously, been out of the question. As he still owned over half the property, Mr R still had the option to raise further funds in the future, should he require them, and the option of moving in the future if he so wished.