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Episodes For The Public Equity Release Types Of Equity Release

Equity Release Interest Only Mortgage Expiring

Huge Disclaimer: The following transcript was generated by a machine. It’s not perfect. It’s definately best to listen to the audio version!

Alex: Hello, and welcome to the equity release podcast. And today I’m with Mark Thompson from CS Retirement Solutions who just surprised me off air by saying that majority of inquiries that you’re getting in business, you’re doing it on people that don’t realize they’re on an interest only mortgage sort of burying their head in the sand thinking they’re paying off their mortgage but no, I just couldn’t believe people didn’t know they were on interest payment.

Mark: I know. It’s amazing, isn’t it? That about 20% of the overall equity lease market in the country. And there are over a million interest only mortgages ongoing as we speak in 2020. But the staggering figures is 126,000 of those are going to be coming to an end.

Alex: Yeah.

Mark: This year in 2020. So you’ve got somebody there has an interest in him or he’s been paying the interest only in their mortgage, and the bank has turned around to them and say or the building society. Okay, your mortgage comes to an end in June. So we want you to pay back the amount that you owe us. So customers are left thinking, well, what am I going to do? Because my situation now in retirement is a lot different or coming up to retirement a lot different to was when I was earning a lot more 15 or 20 years ago. So a lot of people are faced with actually losing their homes.

Alex: Yeah.

Mark: The banks are quite brutal, just say, we want the money to be paid back please. So where do you go?

Alex: Yeah, exactly. So it kind of makes sense that I suppose it depends on everyone’s situation is gonna be different. And so they I suppose that actually does not really help every single person there. They need the right amount of equity available. And so what do I do then? If I’m kind of I’ve just realized today that I’ve got an interest only, the banker chasing me, what’s the first thing I should do?

Mark: Well, a lot of people approach initially seeing if they can get a mainstream mortgage if you like it.

Alex: Yeah.

Mark: And all mortgages, you know, is the one available and how much does it cost?

Alex: Yeah.

Mark: The thing is, if you’ve been paying an interest only mortgage, you’re paying less payments per month.

Alex: Yeah.

Mark: So quite often the face with the fact that if they’re looking at then a capital interest where they’re paying back some of the capital, that then becomes prohibitive in terms of the amount they’re gonna have to pay back or what, you know, what vehicles they’ve got in place to pay back the money in any event. So a lot of the inquiries come from people that are just generally looking out there in desperation, lots of cases it’s people tend to leave things to the last minute in the mortgage world. 

Alex: Yeah. 

Mark: It’s amazing that they don’t always plan ahead. 

Alex: Yeah.

Mark: You know, I’ve had a letter from the bank and in two months time I’m going to be homeless, what can you do for me? And you made a valid point though that equity release it’s not it’s not for everybody and it isn’t everybody’s situation is different. So we don’t just go into equity release is the answer. 

Alex: Yeah. 

Mark: But it’s one of several possible solutions, one of which you sign for a home which a lot of people don’t do a mainstream mortgage, but they have to service that payment then. So if you’re taking a normal mortgage, you’ve heard of possibly other retirement interest only mortgages where you can carry it, take another interest only mortgage, but based on your retirement income, but you’ve got to service that in interest. And so you’ve got to be earning enough and have enough pension enough income to make sure that can be paid back. 

Alex: Yeah, absolutely. 

Mark: So give me just an example. 

Alex: Yeah. 

Mark: The easiest things a couple came to me a few weeks ago, and they’d had a letter from the bank, you know, they’ve been in their community for 20 years. And the bank was saying we want you to pay back the money. Now they were both retired but both had small part time jobs to maintain the lifestyle. 

Alex: Yeah. 

Mark: And they were fairly desperate because this has been stressing them out. They were faced with selling the home that they didn’t want to do, guess they could downsize, boom, they spent 20 years in their home and invested in it, it was lovely. It was their palace. And all of a sudden they’re faced with having to move out. And so, we go on to talk about equity release solutions. And when they understood the concept of it and how easy it was, and the fact that they could take an interest only equity release lifetime mortgage, which meant they could pay back the interest if they wanted or not. They were so grateful and happy to be able to move into that position. So they just took an amount of pay off their existing mortgage. They then had a lifetime mortgage, which didn’t then have to be repaid until either one of them died, the last one of them died or went into long term care, which is the beauty of the equity release product. So they were never going to have to pay it back until the property was fully vacated. And they had the potential of paying back the interest if they wanted or not. So they can service interest or just let the interest build up. And their decision was, well, we can take things a little bit easier because these jobs that they’ve been doing to keep the lifestyle going all of a sudden meant that they weren’t working, it wasn’t end of the world because they wanted to pay back some interest on the mortgage, they could but they didn’t necessarily have to so fantastic solution for those people, you know, and try their alternative was, you could sell a house because there was no other mortgage available to them based on their income. Well, that would have got them out of that situation. 

Alex: Okay. So what would happen then if one of them did pass away to the other person, if they’re in that equity release? 

Mark: That’s the question. Nothing per say in terms of the surviving partner is losing the house until their death or they go into long term care? 

Alex: Right. Okay. 

Mark: So that’s the key thing that you never lose your home on a lifetime mortgage.

Alex: Yeah. 

Mark: And so they basically would live there until they no longer have a need for it. 

Alex: Yeah, absolutely. 

Mark: So it’s that straightforward.

Alex: And then what happens when they’re both gone property goes up for what complications are there in the terms.

Mark: There aren’t really, it’s like any other mortgage, the lifetime mortgage or equity release with a lifetime mortgage is just a mortgage. 

Alex: Yeah. 

Mark: It is, as it says on the tin, it’s a mortgage for life. And it’s fixed for life as well. So we have the payment, the payments are fixed. And as with any mortgage, if the property sold the mortgage plus the interest that accrued, it’s been paid off. 

Alex: Yeah. 

Mark: So it’s whatever is outstanding at that time. 

Alex: Yeah. 

Mark: Isn’t paid off any balance obviously goes to the state. 

Alex: Yeah. 

Mark: The benefactors children, whatever. So if the mortgage itself is just paid off, this concept of losing the house is something that people struggle with. 

Alex: Yeah. 

Mark: The old equity lease as was many years ago that wasn’t fully regulated. 

Alex: Yeah. 

Mark: And there were these things called home reversion plans where people actually sold their property. So companies where we’re buying, we’re buying the property. 

Alex: Yeah. 

Mark: So the property wasn’t mine, all of a sudden, I just sold it to a company. They let me stay in it, but I didn’t own it.

Alex: Yeah. 

Mark: Which isn’t the same as having the mortgage. Home reversion plans now make up a very, very small percentage of the overall equity release mark up. I think it’s something like .5% 

Alex: Yeah. 

Mark: The overall market in total. So just like a normal mortgage, it has to be paid with the interest if somebody is paid the interest often serviced interest as we say. So if you bought 100,000 pounds and you service the interest, then you owe the hundred thousand pounds. 

Alex: Yeah.

Mark: You know if you’ve taken 100,000 and you’ve let the interest just compound that build up an interest on interest, then you just pay back what is owed at the time. So it was people’s decisions or what to do.

Alex: And then what the factors the lenders look at we’re not kind of looking at income and things like that if we’re if we’re so if you are kind of retired, you’ve got an interest only coming up what they’re looking at your age and what’s gonna left in the properties. 

Mark: Yeah. Generally the equity is your property generally you’ve got to be over 55. Property has to be of a certain value lenders are all slightly different. But usually a property was worth at least 70,000 pounds as a minimum. And a property that’s going to be saleable. So obviously if they grant you a mortgage for life, they will know when they get the property back that it can be sold. But generally there’s no income, so I will not be interested in income. It’s based on a client’s age, and the value of the property, and more importantly, how long they expect that client to live. So the amount they’ll lend depends on the life expectancy. So a bizarre label, if somebody is ill and hasn’t got a great life expectancy, they can borrow more money because there’s less risk to the lender in terms of the amount of time that the mortgage will be outstanding.

Alex: And what they send like surveyors around to the properties and work out the value house price. 

Mark: Yeah. It’s still like it will still be severe go around in the main to evaluate it, you know, and to make sure it’s saleable. 

ALex: Yeah.

Mark: That’s the main thing. 

Alex: Yeah. 

Mark: Like any other mortgages, 

Alex: Yeah. 

Mark: If they thought, well, we’re going to invest money in this property. This is our security. 

Alex: Yeah. 

Mark: Is it good security? Is it something that we think we would sell on the market. 

Alex: Okay. Excellent. Anything else I should be aware of? Or any other options are there? If I’m in that situation where I’ve got that letter? Or I suppose the broad question.

Mark: What well, yeah, it is. I mean, obviously, you should first and foremost speak to your bank or your building site to establish the position with them and whether or not they can help you in any shape or form. So that’s the first port of call. It is really, what is your exact position? There’s no point, you know, getting where you need to understand. seek legal advice. As well, you know, people always seem to be a bit slow in seeking the proper advice. But then speaking to people like us that, you know, we’re there to sort of guide them and direct them to the right place. You know, and obviously, with this work where we could, and I would say the point it’s not just right, this is equity release, we’ve got a look at all the options and identify the best option for the client at the time. 

Alex: Okay. 

Mark: But like anything if they don’t want to move now, then what are their options, you know?

Alex: Excellent. So it’s kind of like don’t bury your head in the sand. It might not be the end of the world you may not have to sell. 

Mark: Um, it depends on most definitely and look at it earlier.

Alex: Yeah.

Mark: Don’t leave it to the last minute.

Alex: Yeah.

Mark: You know. I used to say many years ago talking to clients that so are my bankers gray, right? Well, they’re all moneylenders. 

Alex: Yeah.

Mark: That’s what they do. You know, they’re lending you money and they’re lending you money at a rate. What you want to do is get the best rate you can. 

Alex: Yeah.

Mark: But if it comes to a point when you’re not paying them back, then they take on a different persona in that sense. 

Alex: Yeah. 

Mark: Repossessions if you’re not paying your loan back, they’re going to repossess It doesn’t matter how nice they are. Like that’s what they’re in business for.

Alex: How often should I review it if I say I’ve taken it out? The lifetime mortgage? Can I review it? Or is it set in stone? You talked about a bit of flexibility?

Mark: Yeah, that’s a really good question. Interestingly, about 5% of the market are people actually either taking more from an equity release notes, or actually totally swapping one architraves product for another. In fact, you know, the old equity release as well as with the higher interest rates, the higher interest rates where the interest if you didn’t pay it back was compounding very quickly, and people could see the depth going up. There were still those deals around and that and that’s what gives the industry all the money, a bit of a bad name, but with some of the all time low interest rates now, there’ll be a lot of people out there that should be thinking, well, I’ve got an equity release product. The only alternative is perhaps another equity release product, but the new one will be so much cheaper than the original let’s say that forms about 5% of the market. So that’s quite a heavy number. Really? 

Alex: Yeah, absolutely. We have to come back to that case study earlier whether that couple was AC grands that they kind of owed on interest only what were their payments compared to what they were paying before was? 

Mark: That’s a good question. Not too dissimilar if I recall probably slightly cheaper. Again, the rates with an equity lease vary depending on how much you’re borrowing, how much borrowing against the equity, how old you are. So the rates again, the rates are different for everybody. 

Alex: Yeah.

Mark: I think what does surprise people is how cheap the rates are. Bearing in mind the historic Oh, yeah, yes, eights, nines 10s 12%. So I mean, I’m old enough to remember them highly. 

AlexL Yeah.

Mark: Unfortunately you know, there is a fixed rate mortgage interest, you know, for life at 2.5%. 

Alex: Yeah. 

Mark: Which, where can you go and borrow money and fix it for life at that rate? I’m not saying every case is like, 

AlexL Yeah.

Mark:  But obviously they vary, but there are some extremely cheap, right.

Alex: A lot of people search online for an equity release calculator, but it feels like there’s too many factors at play to have a form or a calculator on the website, that’s going to give you the best solution.

Mark: Well, yeah, I mean, obviously, as a mortgage professional, I don’t advise anybody doing it online. Yeah, it was, I mean, you know, it’s amazing that there’s so much online but unless you’ve got a full knowledge of the old saying is garbage in, garbage out. If you put the wrong information in, and you’re gonna get the wrong information out. So as with just the general rule of mill markers I get, I get so many people coming to me saying, well, I’ve got an agreement in principle, and I’ve got it online and then you look at it their situation you think, but you’ve neglected to put in this or the other and actually the worksheet that that way, so before you know it, they can follow 40,000 more than they thought or 50,000 less than this. Yeah. So, and yet, it’s always good to, I like my clients to have knowledge and knowledge gives them the confidence to proceed with it. When I’m first dealing with anybody I’m at, you know, I want them to understand what it’s about, understand the concept. So it’s an educational thing, really getting to really understand the point and they feel more comfortable with it, you know, quite a frightening thing to do and quite foreboding, especially as people are getting older. Having said that, a lot of the older clients are a lot more savvy than some of the younger clients are gonna be very careful. 

Alex: Yeah.

Mark: I’ve got some elderly clients that will run around the block on finance. 

Alex: Yeah.

Mark: Very, very savvy, which is good. But I think anything that educates them about what they’re doing and you do find clients do do that anyway, I speak to people who have been looking at it for a while. It’s not unusual to say to myself, I’ve been looking at this for a year now. 

Alex: Yeah. 

Mark: And thinking about it. But what I can explain in 10 minutes or 15 minutes.

Alex: Yeah.

Mark: You know, overcome what they can take, and if they’ve got quite understand or the real end of the stick with something, so, so

Alex: Yeah.

Mark: I like people to have that education on it. But sometimes, a little knowledge in doing yourself.

AlexL Yeah. 

Mark: And then you’re only looking at maybe one provider and as it’s at all different. So I wouldn’t even know until I go on a system and look at the thousands of products that there are, isn’t it which is going to be the right one for the customer? Right, right. Right. So

Alex: I think I’ve got one last question. 

Mark: Yeah. 

Alex: I know he says kind of plan and not leave it to the last minute but someone’s listening now. And they have how long will this process take if we had a meeting with you, we arranged it. you were available tomorrow. How long will I know that there’s something that can be done. I don’t have to sell if I don’t want to.

Mark: And we’ll, two questions. The first one, how long does the process take? I think the average equity release time scale is about five weeks. That’s the average. 

Alex: Yeah.

Mark: So you can have some that take quite a lot longer than that. 

Alex: Yeah.

Mark: Sometimes it depends on the income all sorts of things come up with regarding the property our clients where they’ve looked at the property and said, Actually, we have to lend you the money, but the property isn’t quite where we want it to be. So we want you to do this repair, do that repair, make that roof good.

Alex: Okay.

Mark: Yeah. So that can contract something on here. I’ve literally known of clients get money released when they’re looking to buy a house. Awesome, because, again, people don’t understand they can take it on the property that they’re going to buy in the transport. Leave politics with you guys. They can have an offer out within less than a week. So again, it’s like a normal mortgage. I have some offers come out in a day and some 

Alex: Yeah.

Mark: But yeah, it is, it is a much quicker process. And generally, I would say about the industry average is about five weeks. 

Alex: Yeah. Okay. And then if I’m, if I’m panicking and thinking I really left this at the last minute, will the banks consider that I’m looking at it? Would they ever delay if they say we’re gonna, we’re gonna go to pay this in too late?

Mark: That’s a really good question. I mean, again, in my lifetime of advising people, yes, you would all banks have got a duty of care to the client. 

Alex: Yeah. 

Mark: And they’ve got to be seen to be doing the right thing. And if they can see that you’re doing something, if you’ve got the right bank and the right person on the end of the failure, then there’s no reason why they shouldn’t give you more time. 

Alex: Yeah.

Mark: To sort something out. And again, that’s why I would always encourage speaking to the bank, and keeping a good dialogue with them. So yeah, that’s a really good, really good question. But yeah, you would keep in touch. And you would hope the bank would give you time. I mean, it’s not gonna be looked up very nicely in court. If, yeah, you know, some elderly couple has told me that I moved out of the home on the basis that they’ve not given them time to actually resolve the situation. Say, actually, this is when we’re relevant, can be can be sorted very quickly.

Alex: Fantastic. So if I’ve not asked any questions, I’m thinking of an okay to drop you an email or how’s the best to kind of cover it off if someone listening has got a question about

Mark: Well, give my phone number if they want to know. 

Alex: Yeah, absolutely.

Mark: 07789941700 is the mobile and mark@csmortgage.solutions.co.uk is the email address. I mean, obviously they can go to the CS Retirement Solutions website and see the team there. There’s some great information on there. They could probably even get a picture of me too. So all I am but they can get information from there as well. So I would send them down at them to go to the website or if not to contact me directly.

Alex: Fantastic. Thank you very much. Thank you Cheers.

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Episodes For The Public Equity Release Types Of Equity Release

Equity Release To Gift A Deposit For A Mortgage

Huge Disclaimer: The following transcript was generated by a machine. It’s not perfect. It’s definately best to listen to the audio version!

Alex: Hello, welcome back to the equity release on podcast I’m with Mark Thompson from CS Retirement Solutions. And we’re going to talk about using equity release to gift a deposit to normally I presume children or grandchildren. So if I’m in a situation where I want to buy a property and I’ve not got a deposit, I could potentially approach mum and dad or grandparents and say, can you help me out?

Mark Thompson: Well, you say potentially as apparently a third of all deposits are gifted or loaned from parents. So the Bank of Mum and Dad is actually massive in today’s marketplace. I think the average deposit across the country is about 33,000 pounds that you know that people are paying. But as I say a high percentage of first-time buyers are relying on the bank of Mum and Dad to loan in the money. More often it’s gifting the loan. 

Alex: Yeah.

Mark Thompson: So, in fact, the Bank of Mum and Dad in 2019 was the 11th largest moneylender in the UK, and because of an amalgamation of a couple of the banks, and somebody else pulling out of the market as we speak, it’s probably in the top 10 now.

Alex: Yeah

Mark Thompson: So you’re talking about the Bank of Mum and Dad are in the top 10 lenders of the country. So very, very commonplace. 

Alex: So if I am Mum and Dad, and I haven’t got just cash sitting in a savings account or anything, I can use the lifetime mortgage equity release. I can basically take out what I’ve already paid on one property and I can gift it to them

Mark Thompson:  With the lifetime mortgage I mean, equity release, you are releasing money from your property. So the equity that you’ve built over the years, you can to release, but to a point of you want to take out of the property, depending on your age and your health, you’re allowed to take so much of a percentage of it from the property so yeah, in essence, it’s that simple people, you know, they’ll identify what the children want. The complication can be that you’ve got one child but then you’ve got maybe two or three.

Alex: Yeah

Mark Thompson: What do you do? And you know, quite often I have clients that will decide that they want to give their inheritance to all three at the same time. So if they are going to give it to one child to buy a house and they’re going to take out an equal amount to the other children which makes them feel comfortable. The beauty of it of course, is that they get to see their money helping and assisting the children, you so they can really see the benefit in the money rather than waiting to die and leaving it when potentially the children might not need it at that stage. 

Alex: What is the implication? Because I think if Mum and Dad are let’s say their 60s, 70s, or whatever, they go down the pub and talk to a friend about it, they’ll most likely say, Oh, don’t do that interest rates are ridiculous. They’ll own your home and they’ll take it off you.

Mark Thompson: Yeah, as we’ve discussed previously if they’re taking a lifetime mortgage, and it is that it’s a mortgage for life, so they can never lose the house. In reality, they will always own the home and so the last surviving partner either dies or goes into long term care. So basically, they’ve got no further need for that property before that loan is due to be paid back. So there’s no risk in terms of that situation. And also now, the equity release council certainly all the business we do is monitored and regulated by the equity release council. So they have a no negative equity guarantee. So you hear people say, Well, you owe more than you actually borrowed. That doesn’t happen under equity release council guidelines. And so you can never owe more than the house was worth. So yeah, it’s pretty, it’s pretty straightforward.

Alex: And also normal arrangement then with so they’ve got a few questions on gifting. Are there taxes involved in that on the other side? Or is that kind of a tax? 

Mark: Yeah. Obviously, I’m not there to advise on taxing,people should always seek their own advice on tax. There is an implication in any given situation. So people should look at that. 

Alex: Yeah.

Mark Thompson: So there can be implications on that. 

Alex: Yeah. 

Mark Thompson: But that’s individual.

Alex: How often is it happening? What were you saying this was kind of one of the second biggest reasons for people taking equity release. 

Mark Thompson: Oh, it’s very, very common. Extremely common. So 27% I think of the equity release is for gifting. So, you know, one in four-ish. So that’s quite a high percentage. Certainly, my experience with clients is that it’s very common. And the interesting you mentioned earlier on about if the client hasn’t got any, you know, they haven’t got any money to lend the children and therefore would go down there to choose. I’ve got clients that have got plenty of money. 

Alex: Yeah

Mark Thompson: They’ve got their own savings, they’ve got the deposits, they’ve got their investments, but they don’t want to touch those. 

Alex: Yeah

Mark Thompson: You know, they want that for their rainy day and they want their security and they want to maintain that lifestyle. So I had a lady recently who decided she wanted to take the equity release product to assist her daughter who couldn’t get a mortgage. She had a few sorts of credit issues. 

Alex: Yeah 

Mark Thompson: The previous relationship, couldn’t get a mortgage. She was living with a mother with her two children. And bless her mother was doing the best she could but there were two young lads in the house but she was finding that quite challenging. 

Alex: Yeah

Mark Thompson: But that lady wanted to take equity release because she didn’t want to impact on her existing savings and investment. 

Alex: Yeah. 

Mark Thompson: Which you could all do. In that particular case as well. What was interesting is that the daughter was prepared to service the interest so the daughter couldn’t get a mainstream mortgage. So mother would take equity release, but again didn’t like the idea of the interest compounding and building up so it was an arrangement and this is very common where the daughter that was benefiting from the deposit would pay the interest on the loan, so it was never going to increase, which made the mother very much more comfortable with the whole situation. 

Alex: I can imagine. And then for the gifting if I’m taking responsibility for those payments, will that affect my mortgage affordability on the property I’m buying as well?

Mark Thompson: Technically, depends on the situation. But yes, it could do and you could have to disclose that it depends on your available forms, so to speak. This particular lady had plenty of income. 

Alex: Yeah 

Mark Thompson: The daughter, she just had bad credit, so she just couldn’t get a mortgage. So for her, it wasn’t a question of affording. It was a question of I just can’t get a mortgage. So it was a solution to that particular problem.

Alex: What other instances are there? So that person she’s got high income, bad credit that just needed some extra cash to get? Get them all right and what easy, people have got a good income, they just don’t literally don’t have enough deposit or any deposit or … 

Mark Thompson: There is but you get people that just I mean, just having any deposit. 

Alex: Yeah

Mark Thompson: You know, generally speaking in the old days, people would go and get a 100% mortgage. 

Alex: Yeah.

Mark Thompson: Well, of course, those are a thing of the past. 

Alex: Yeah.

Mark Thompson: I know. There’s talk about bringing them back in, but most people need a 5% deposit as a minimum. 

Alex: Yeah. 

Mark Thompson: And you look at, you know, people’s lifestyles, it’s very difficult to generate a 5% deposit and obviously, the more you borrow in the terms of the loan to values if you’re borrowing 95%. So it’s quite an expensive, still cheap in real terms of a mortgage, but it’s still quite expensive because you’re putting less deposit down so and again, depending on people’s creditworthiness or previous credit history, that the higher the loan to value, the more difficult it can be to get a mortgage in the first place. So a lender might say, I’ll lend you an 85% loan to value all day long. I’m not gonna lend you 95%.

Alex: Yeah.

Mark Thompson: So that balance could be that you know that loan or gift from the parent or bank of Mum and Dad is the difference between making it happen or not. And interestingly, I know we’re just jumping away with weddings. A quite a very common thing. I mean common weddings now and people are affording weddings and obviously a lot more glamorous now than ever. You know, but weddings are a massive issue for people looking to take a equity release and you know, where parents are able to support the children to have a good wedding or honeymoon, etc, where it wouldn’t be in a bit of a spot on the first so that that’s quite a common one in that sense. 

Alex: Yeah. Because I was just thinking with my property head on thinking about the deposit for a property, weddings, and what are there any other sort of common reasons? 

Mark Thompson: Well, the biggest one is home improvements. So believe it or not, home improvement is the biggest reason for people taking action with equity release, I think there’s 67% of some part of the loan is to do some home improvement, conservatories, you know, and just generally improve the living standards, you know. So, in other ways, you could argue that they’re not losing that money because they’re just reinvesting money that was in the property back into the property to increase value. 

Alex: I was gonna say, yeah, how does that work? Because the value of the property would increase if you were, yeah.

Mark Thompson: The value of the property increases, because you’ve just spent money on your property. So the equities have gone up. 

Alex: Yeah. 

Mark Thompson: So you’re taking, you could argue you’re taking money out and really reducing your equity, but that one is and being reinvested. So you almost just moving your money rather than just taking it out. But yeah, but that’s, that’s a very common, a very, very common reason for people taking equity release. And they can have all sorts of reasons for doing it. You know, I mean, divorce in the 60s, the divorce rate in the over 60s is not going down, unfortunately, it is under 60 now, which is really nice to hear. But you know, the 60s it’s not. So you just imagine you’re in a relationship. You’re living in your matrimonial home, and all of a sudden you’re going your separate ways. That’s a very costly exercise. And people are turning to equity release for one of the partners to stay in the property and buy the other one out. It’s a solution that so not all just general debts, people have general debt. So the debt consolidation. It doesn’t make sense to be struggling in life. 

Alex: Yeah

Mark Thompson: Depending on the situation, but why struggle with things when there is a potential solution? And we know people are because I think the market was 4.9 billion last year was either lent or reserved in terms of products available officially. So it’s a huge market.

Alex: Cool. Just to circle back to the gifting size a minute. We may have already sort of covered this, but I’m kind of thinking if I’m listening and I other than wanting to have the awkward conversation with parents about borrowing money. What’s the best way to explain it overall. Say, Mum, Dad, I need some help. Have you heard of equity release?

Mark Thompson: Yeah, good. You just hit the nail on the head there is it a difficult one to raise? I mean, generally speaking, we would always want to sit down. In any equity release case, I think it’s important to know that we always encourage people to sit with their families anyway. So we always say to bring your daughter and your son and your family. Several, you’re fully comfortable with lots going on until you understand it. So obviously, we would just offer to speak to the parents jointly with you know, whoever was looking to discuss the daughter, whatever. So I just have a joint general chat as we are doing now. an educational chat to give them an understanding of a solution that might be pertinent to them. 

Alex: Yeah.

Mark Thompson: And what’s available. If it’s something they want to pursue, then it is pursued. But initially, it’s just an educational thing, letting them know exactly how it works, what the impacts would be making sure that they can explore the impact of it. It has a bad reputation for many years ago, actually, as we’ve discussed more. And it’s nothing like nowadays, rates are totally different, products are different, regulation is different. So most people want to get over that initial “I don’t like the sound of it, because I’ve been told that it’s not a good thing.” I see it as a very straightforward solution to certain life situations. 

Alex: Because to me, in terms of the gifting thing, it feels as simple as I’m going to get it. That equity anyway. What harm is there in delaying or in terms of taking that out now rather than wait until my parents pass away.

Mark Thompson: Well, it is that simple. You know what are the benefits? The benefits are that the parents can see their children benefit and they can have the pleasure in thinking I’ve given them this money, give them the step on the ladder, support them in their hour of need when they need. I’m only going to give it to them at a later stage, as we said, potentially stage when they don’t necessarily need it. 

Alex: Yeah

Mark Thompson: I mean, what is interesting nowadays, a lot of people, you know, you get the thought it was the clients that are desperate to leave money to the children. I can’t spend their inheritance. My mother was like that. And then those that say actually the kids have already got three times more in life than we ever had. You know, why am I going to leave them it because I know what they’re going to do with it the first day they get the money, they’re going to go and spend it so I might as well do that myself. So my Dad and my Mother have opposing views on the way equity works in it in our property. But yeah, that’s the way people see it can be. And there are ways of protecting the equity. So there are equity guarantee schemes. So, again, nowadays if somebody’s thinking, well, I don’t want my equity to diminish too much I want to retain so much, they can take a product which ensures that their equity is always going to have a certain amount. Now, they might not be able to borrow as much because obviously protecting equity, you might be surprised, but you can see there are products that enable you to do that. 

Alex: Yeah. I think I’ve got one question. I think I know the answer to it. But if I’m taking the gift for the deposit, my mortgage that I get myself as that as the recipient of the gift there’s no link to that other properties if anything goes wrong with either while they’re completely separate. 

Mark Thompson: Yeah, absolutely. That’s a really, really good question. They are completely separate. And in fact, they can’t be connected because the lenders of the children’s mortgages would not want any link to exist. So there can’t be any hold on that particular property. So even if loaning the money, it can’t be a loan that is secured. Usually, it’s a gift. So usually they’re happy that the parents just gifting them the money that so they don’t want anything back. They don’t want any interest in the property. In the odd case where they loan it on the base of the loan you it and you’re going to pay it back. There can be no situation where they’ve got a shall we say, an interest in that problems so that the parents would have to sign away their rights as an occupier in a household if they do, you know, to say, look, you know, our rights don’t override those of the bank. So yeah, very good question.

Alex: Yeah, I thought that was a rubbish one.

Mark Thompson: No, no, no. I’m impressed with that one. Good question.

Alex: I’ll leave it on that. Let’s leave it like that. So we’ve got your number, a mobile, if anyone’s got any questions, I’m sure there might be some. So if you’re open to a sort of if someone send you an email, call, if they’re unsure of.

Mark Thompson: Always happy to help with a chat initially, with clients, it’s just an educational thing to start with just you know, they can take some time to take quite a while to come to the decision that they want to go down that path. It might not always be right for them. And I’ll have to look at other solutions as well. So I just look at equity release as a first protocol will look at every solution that exists to ensure that it’s the right one for that. But yeah, happy happy to chat. And, you know, I enjoy helping people and helping them understand, you know, what the ramifications are and how it works. Always happy to have a chat which costs nothing and certainly no pressure on anybody when they ring, you know, just a very, you know, just as we are now you know, that’s what questions they want. We’ll ask the questions and just educate them on what they’re thinking about doing.

Alex: Fantastic. Thank you mate.