For equity release customers, using the money released by a lifetime mortgage to make home improvements has consistently ranked in the top two reasons as to why they accessed their housing wealth. However, the impact of this choice is often overlooked in and outside the industry. In essence, the decision to use the funds released to pay for home improvements is essentially an investment, and often a very wise investment at that.
According to Bower Private Clients, 49% of 988 over-55s surveyed by Consumer Intelligence said that they would use the money released via a lifetime mortgage to improve their home, but these improvements go beyond the aesthetic, of course. The addition of a conservatory, for example, can yield a 100% or more return on investment; adding an extension usually costs around £20,000, but the return could add a further £14,000 to the value of your home; even doing up a bathroom can yield a 48% return on funds invested.
In the most part, the Baby Boomer generation were able to buy a property relatively young and then see said property rise and rise in price over the years. What’s more, many Baby Boomers have climbed higher on the housing ladder than their children or today’s youth may ever hope to reach. However, despite this ‘luck’, the Baby Boomers are not resting on their laurels – they’re reinvesting their gains back into the asset that got them there in the first place!
However, the true impact of reinvesting in one’s home goes beyond simple monetary incentives – there’s a critical family and emotional element to most cases. Retirement is lengthening, and whilst the retirement age only creeps up steadily, most of us should expect to be living through retirement for 30 – 40 years. So, seeing as though some of us will be retired for a third of our life or more, shouldn’t everyone be able to live out their final years in complete comfort? The financial flexibility to create this comfort is one of equity release’s most overlooked characteristics.
According to insurer RIAS, grandparents spend an average of nine hours each week looking after their grandchildren, and many equity release customers explain that they wish to improve their home to make it more hospitable to their young relatives. With such an important role to play in the day-to-day running of a family - a role that also saves working parents nearly £2,000 per annum on childcare fees – it is unsurprising that older homeowners are improving and altering their homes to meet the needs of their children and grandchildren.
At Bower Retirement, we often help customers convert their housing wealth into cash to be used to create added living space for extended family, a new conservatory, extension, garden improvements and myriad other improvements, ranging from minor tweaks to major alterations, backed of course with the essential advice so clients understand all of their options.
Beyond the financial benefits of reinvesting in one’s home, and the emotional and practical benefits for family reasons, equity is often released to help adapt the home to various care-driven necessitates. There are more elderly homeowners now than ever before, and thousands are in need of some form of medical care. The impact this can have on the wallet is often staggering and with dwindling grants, some have to turn to their biggest asset – their home – to meet the cost.
With the use of the lifetime mortgage, those who need to make drastic changes to allow for at-home care can do so and the advice process will ensure that all available grants and benefits are considered. So, as the likelihood of homeowners wanting to downsize declines with age, the likelihood that those same homeowners will require at-home care increases with age.
For thousands of homeowners in the UK, both those who have just entered retirement and are looking to improve their home for financial or family reasons, or those who are in need of home improvements or alterations for medical reasons, the lifetime mortgage could be a very viable option.
