Property wealth playing an increasing role in financing the ‘Bank of Mum and Dad’ and not before time

Property wealth is playing an increasing role in financing the ‘Bank of Mum and Dad’ and not before time, writes Peter Boyd.

The way that us Scots think about our homes is changing – and changing for the good.

Yes, we still have no desire to hold back on the dream of home ownership, but what we do once we own a property outright is on something of a revolution.

The Holy Grail for many homeowners is to enjoy a comfortable retirement in the home they have worked so hard to keep and to make their loved ones journey into ownership that little bit easier.

However, even when a mortgage has been cleared, it’s often the case most people start to then worry about how they can maintain their lifestyle or have more than a passing thought on affording care in older life.

Step forward an ever-growing number of Scots property owners who have realised that there is a way to unlock their previously hidden property wealth to meet these challenges.

Plans for equity release in Scotland, where homeowners can cash in, tax free, on the value of their properties while maintaining ownership, have increased almost 40 per cent year-on-year[1].

This equates to some £21.6million worth of cash.

And with an average release value of £42,379, these savvy owners are taking the opportunity to make the most of wealth amassed over the years in a number different ways.

Holidays and home and garden improvements feature highly on the list of spending options.

However, 22 per cent of owners in 2016 said they opened up the ‘Bank of Mum and Dad or Grandad/Ma’ and have passed cash onto family and friends to help give them a leg up on to the property ladder.

Across the UK there were 8604 new equity release plans in the first quarter of this year – again up hugely on the 2016 figure. That’s £663.3million of equity cash released with the potential to transform the lives of families everywhere.

This suggests equity release – thanks to welcome changes in regulation to improve the previous poor reputation, the introduction of product safeguards and the need to meet face-to-face with an independent solicitor - is here to stay.

For example, the ‘no negative equity’ guarantee means that the amount you have to pay back to the lender can be no more than the sale price achieved for the house. There is no question of you or your beneficiaries being asked to make up any shortfall. Even if the house goes into negative equity during the period of the loan you can stay in the house for as long as necessary secure in the knowledge that the house will be sold to pay back the loan and nothing more can be claimed. 

The reality is that anyone who owns a home bought with a mortgage has effectively been ‘saving’ throughout their lives. 

It’s that crucial mindset switch that is fuelling the change in the way we look at property ownership in Scotland. People are now realising that the house you live in is a potential source of income in older life because your mortgage has been invested in bricks and mortar – and that wealth can be unlocked.

Many of us have been saving for decades whether we realise it or not - equity release can be an unforeseen reward for that hard-work.

For coverage in The Scotman, please click here

Peter Boyd is the Managing Director of Boyd Legal

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