One third of homeowners currently over age 45 and with a mortgage are unlikely to pay it off before they are 65, which suggests that people are overestimating the capacity of equity in their homes to satisfy their financial aims in retirement. In the wake of long term house price rises, an increasing proportion of homeowners have become used to regarding their property as the goose which will lay a golden egg when they retire.
However, a combination of greater longevity, the cost of care in old age – which is not mitigated for those with reasonable equity in their properties – and lingering mortgage debt, means that the egg could be of far baser metal than gold. A recent survey indicates that 7 out of 10 home owners reckoned that their property was worth more than their savings, investments and pensions put together. But 4 out of 5 wanted to remain living in them as long as physically possible, limiting their options for releasing equity. For those advisers not already doing so, it would seem both prudent and ‘TCF’ to include a realistic estimation of the income potential of their client’s properties in any financial planning.
The above is the lead article in our monthly News Notes. Please click here for information regarding these notes.