Equity release to help friends and family

The financial impact of COVID-19 

The coronavirus pandemic has caused people all across the world to alter their lives and within the UK, for a long period, we were only permitted to carry out essential tasks, forcing businesses and retailers to alter – or completely stop – the goods or services they perform. The Office for National Statistics, stated: “[the] economy has experienced a significant shock since the start of the coronavirus (COVID-19) pandemic”; central to this was the drop in GDP, which ​“fell by 20.4% in the month, the largest fall since monthly records began in 1997, reflecting record widespread falls in services, production and construction output”. 

It’s not all bad news, however; there has been an expanding number of commentators observing that the UK economy is showing signs of recovery. For example, Bloomberg recently observed: ‘[the] U.K. economy started to bounce back from the coronavirus this month [June]’.

Despite these early signs that we are through the worst of it, the effects of the pandemic have had real consequences for many families, with the Bank of England commenting that in the UK, the unemployment rate ​“rose from 3.5 percent – its lowest in over 60 years – to 14.7 percent in April, the highest rate in 80 years”. 

Even for those of working age lucky enough to keep their livelihoods, the reality of furlough may have meant a reduced monthly salary and in some instances, people have had to take voluntary leave from work either to care for children or a vulnerable adult.

And all of that is before we consider the challenges of working from home and home schooling children who could only get out for an hour a day.

How equity release can help 

If you have loved ones who are struggling, equity release could be a viable means of helping them, for example: 

• Helping with regular bills.
• Home extension/​garden office – being forced to work remotely without an adequate office space can be cramped and claustrophobic. An extension or garden office is a great solution if they know that they’ll be at home for the foreseeable future, or are likely to continue working from home some of the time even after they do return to their office. 
• Help a family business – has a loved one’s business been severely challenged by the coronavirus restrictions? It’s heart breaking to see a business that was thriving prior to COVID-19 going under. If you’re confident that the business will be successful if it can get through the immediate challenges, then equity release could provide the cash injection needed to see it through. 

Equity release options 

If you – or your loved ones – don’t want the debt to mount (which would reduce the value of your estate), there are options available that will help you limit the amount owed: 

• Pay off the interest, rather than letting it roll up – this is an option available with lifetime mortgages. The advantage of doing this is that if you pay all the interest, your total debt will remain the same. This can be a great option if your loved ones need a cash injection but are likely to have the ability to meet the interest payments, either now or in the future. 
• Overpay by up to 40% so that you pay off the loan as well – known as ​‘voluntary repayment plans’, these allow you to repay up to 40% of the borrowed amount each year, so you can clear the debt. 
• Repay early without penalties – this is an option through some providers on some products, so again it is good to get expert advice so that you can get the right plan for your individual circumstances. This is a good option if you think your loved ones’ finances will be restored. 

The importance of honest, transparent equity release advice 

Like all big financial decisions, releasing equity is complex. It’s vital to have an expert who is really on your side and who can help you and your loved ones weigh up whether this is the right option for your personal circumstances. 

“The research published by the Office for National Statistics confirms a reality that most of us already knew: that coronavirus has had far reaching-economic implications, negatively impacting the financial wellbeing of many people across the UK. Equity release is one option to consider if you – or a loved one – is thinking about how to plan for your financial security across the coming months,” commented Jan Johnson, director of 55Plus Equity Release. 

“At 55Plus Equity Release we believe in equipping you with the best information to decide whether releasing equity is right for you. It’s a decision that should not be taken lightly and the best way to ensure that you are well informed is in seeking professional advice. We welcome you to invite family members to your consultations as we strive always to be transparent with our clients.”

If a loved one is facing financial uncertainty as a result of COVID-19, then releasing equity may be a viable solution to help them through it; our experts are always on hand to advise you on whether releasing equity may be appropriate for your circumstances.