Are you feeling overwhelmed by financial challenges? Reach out to Paul Lewis, our new financial agony uncle and seasoned broadcaster. Is there something you’ve always wanted to ask but find confusing? Do you need clarity on your rights in a particular situation? Have you recently felt taken advantage of financially? Paul is here to assist. While he cannot take on individual cases or compel companies or the Government to act fairly, you can send your questions about money matters to Paul at [email protected]. He will address some of these inquiries in this column. Remember, this is your column, so don’t hesitate to send in your questions!
Bob from East Anglia writes:
I’m in my early seventies, semi-retired, and live in my own bungalow. Unfortunately, it’s in dire need of refurbishment. It’s a sturdy pre-war structure but has outdated electrics, lacks double glazing, and relies on an old oil-fired boiler. I have no capital and a low income. My wife works as a care worker. I’ve seen advertisements suggesting that I can ‘sell my house and live there until I die’ to access funds for repairs. Are these offers reliable, or is there a better alternative out there?
Paul replies:
Hello Bob, your concerns are quite common among those of us entering our later years. However, I advise you to be cautious with any financial advertisements you encounter during daytime television. Major financial decisions should only be considered with firms that are properly regulated. A few companies that offer what is known as “home reversion” are indeed regulated. If you’re over 60, these companies can purchase a portion of your home and allow you to continue living there until your passing, at which point the home is sold, and the proceeds are divided between them and your estate.
However, many of the firms advertising cash offers to buy your home are typically unregulated. Engaging in such deals can leave you vulnerable for the rest of your life, which is certainly not advisable at any age. For a passionate gardener like yourself, I recommend steering clear of these offers.
Instead, there are two more viable options you should consider. Since you own your home outright and, as you’ve indicated, it is a solid structure, my first suggestion is known as equity release. This simply means you can unlock (release) some of the equity (the value) of your home in the form of cash, which you can then use as you see fit.
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To achieve this, you would take out what is known as a lifetime mortgage. This differs from a traditional mortgage in that you are not required to make repayments while you are alive. Instead, the interest, which is approximately 6.5% per year, accumulates on the debt, and the total amount is repaid from your estate after your passing.
At 72 years old, you could potentially borrow around 35% of your home’s value. Given that your home, with its large garden, is valued at about £400,000, you could access funds of up to £140,000. This amount should be sufficient to upgrade your electrical system, install double glazing, purchase a new boiler, fit proper radiators, and also cover any necessary repairs and redecorating. Perhaps you could even set aside some for a well-deserved holiday!
Since you live with your wife, Mrs. Bob, typically, equity release would be taken out jointly, meaning the debt would only be repaid once both of you have passed away or if either of you enters a care home. You mentioned that Mrs. Bob is younger than you. While this usually disqualifies her from equity release, I consulted a knowledgeable equity release broker to explore possible solutions.
Here are two important questions to consider:
- Is Mrs. Bob listed as a joint owner on the property deeds? If not, this could simplify matters.
- Would she be open to signing a waiver indicating that she would vacate the home upon your passing? While this may sound extreme, I sincerely wish you a long life, and statistically, it is likely that when you do pass away, there will still be ample equity in your home for her to inherit and use towards acquiring a new living space.
Next, seek out a reputable equity release broker who has access to the entire market and is a member of the Equity Release Council. Two of the largest and most respected firms I have dealt with are Age Partnership (www.agepartnership.co.uk) and Key (www.keyadvice.co.uk). Exercise caution when searching online, as you may encounter advertisements from firms that may not suit your needs.
The broker you select will reach out to lenders they work with to determine who would be willing to engage in a deal under those circumstances. My expert contact reassured me, stating: “We’ve definitely done deals with a waiver to exclude a spouse from the loan terms.” While this approach may appear complex and risky for Mrs. Bob, given the age difference, it is a feasible solution. Ultimately, the decision rests with you both as a couple.
For many married couples who are closer in age, if both partners are over 55, equity release can be an excellent way to finance essential repairs and improvements to the home.
If you decide against equity release, look into local charities focused on care and repair. Organizations affiliated with the Home Improvement Agency can assist individuals with limited incomes in making necessary repairs. Based on the details you kindly provided, your home indeed requires significant work to ensure it offers a warm and healthy living environment. So, do some research to find one in your county that may be able to assist you.
Bob, while neither option may be perfect, they are both far superior to relying on an unregulated firm advertising on afternoon television. That is where the real pitfalls lie. Wishing you the best of luck in resolving your situation!
