I am a widow and have only a small private pension in addition to my state pension. I’d like to make a few minor modifications to my bungalow to make it easier to get around with my walker – I have a bit of a hard time getting around these days – but I’ll have to borrow some money to do so. I could get a bank loan I guess but I wonder if I could get an equity release on my bungalow and take a little more than I need to have a rainy day fund?

Diane Poisson from Smith and pinch respond :

There are several options available to you if you want to borrow in retirement. This could be an interest-only retirement mortgage, a home improvement loan, or an equity release agreement.

The key factor, in your case, may be your ability to afford repayments. Equity borrowing is based on your age and the value of the property, while other borrowing would be based on income and affordability. It would help, I’m sure, if you spoke to an independent financial advisor who specializes in mortgages and other borrowing.

Releasing equity, in the form of a lifetime mortgage, might just be the right solution for you, especially if you want the ease to allow you to withdraw more money if you need it at a later date. . A lifetime mortgage can be set up with a pre-set drawdown facility – essentially a maximum amount you can take in total – and you can draw on that as needed. The advantages of this type of arrangement are that you don’t have to anticipate your future needs and only pay interest on the amount you actually borrow.

There will be costs involved in setting up a lifetime mortgage agreement as well as interest payable. Interest is typically “accrued” to be paid when your home is sold, perhaps after your death or when you move to a long-term care facility. In all cases, it will be necessary to pay off the outstanding debt in full when the house is finally sold.

What you need to remember is that taking out an Equity Release / Lifetime Mortgage Agreement will mean that the value of the estate you bequeath to your family upon your death will be reduced. It may also affect your entitlement to means-tested benefits, both now and in the future. The equity release can be more expensive compared to a normal residential mortgage. In addition, you will still be responsible for the maintenance of the property.

It is a mortgage for life. To understand the features and risks, request a custom illustration. There will be a fee for mortgage advice. The exact amount will depend on your situation, but we estimate it will be a minimum of £ 700. The opinions expressed in this article do not constitute advice.

For more information, please visit www.smith-pinching.co.uk