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MORE LENDERS OFFER OLDER PEOPLE THE CHANCE TO LIVE BETTER

Speak to an independent financial adviser to find the best deal for you

Wednesday June 25,2008

A GROWING band of lenders and insurers now offer equity release, including Bradford & Bingley, Bridgewater, Bristol & West, Norwich Union, Prudential, Standard Life and Stroud & Swindon building society.

You should look for a company belonging to industry body Safe Home Income Plans (Ship).

Members guarantee you can continue living in your property until you die or go into long-term care, and that, no matter what happens to property prices, you will never owe more than your home is worth.

This is called the no-negative-equity guarantee, and it is priceless, says Kirsty Jackson, head of lifetime mortgages at Bradford & Bingley.

“Even if house prices collapse, you can’t lose out,” she says. “Instead, the lender is taking the risk on your behalf.”

There is another reason why lenders are still happy to offer competitive equity release rates when they are running scared of standard mortgages.

Even if house prices collapse, you can’t lose out - the lender is taking the risk on your behalf.

Kirsty Jackson, Bradford & Bingley

“The borrower can’t default on the loan, because they don’t make any repayments until their house is sold. That makes it a much safer bet for the lender,” Jackson says.

As equity release evolves, new products are regularly being launched. Godiva Mortgages, a subsidiary of Coventry building society, now lets you repay your entire loan in the first five years without penalty.

On most schemes, you face a hefty penalty if you decide to pay off your loan in the first five or 10 years because, for example, you have come into an inheritance.

Several lifetime mortgages and home reversion schemes now also allow you to guarantee a percentage of your property’s value will go to your dependants to make sure they get at least some inheritance.

People sometimes confuse equity release with sale-and-rent-back but the two are very different. Equity release is safer because you are guaranteed the right to continue living in your home for the rest of your and your partner’s life, and schemes are regulated by the Financial Services Authority (FSA).

It is worth speaking to an independent financial adviser to talk you through the pros and cons and find the most appropriate deal for you.