A new report generated by the Personal Finance Research Centre and International Longevity Centre discusses living and food costs. The study resulted in six groups with specific patterns and expenditures that can be used to describe the over 50s. Some of these groups, generally in the Baby Boomer range, tend to have more expenditures than conservative consumers with a head of the household in the 80s or older. With this penchant for spending more at a younger age, even with a career that supported it well, equity release is becoming more of a way to protect retirement lifestyles. Explore equity release calculators to see if your Baby Boomer status could use a boost!
The Spending Situation of Younger Retirees
About 46 per cent of older households comprise the Conservative Consumer category in which no more than £10 is spent per week on food, with an average of £20 spent on culture and recreation. These households live on welfare benefits, and have someone 80 years or older running the household.
Most of the other spenders fit into a higher spending category with at least the average £34 spent on food and entertainment. Socialites who are still under 65, but over 55 are the most well to do who also spend upwards of £131 per week on entertainment and eating out.
Younger individuals who are reaching retirement age are spending a great deal more than the past retirement generations. With a difficult double recession and severe losses in the stock market and retirement portfolios, Baby Boomers are facing a scenario of running out of funds in later retirement.
The Potential Solutions
There are several solutions to spending too much too early. Spending can be curbed in order to avoid a situation later on when all that is left is equity. The good news is most who tend to spend more and fit the socialite category are also home owners, with the potential of tapping a large equity amount.
Another solution is to sell the larger home and downsize to something smaller that takes less to run.
Unfortunately, most in the London Baby Boomer category do not like either solution. They want to keep their extravagant and hard to earn lifestyle. They worked for it and for the home they live in. As cash poor situations become an issue, these consumers turn to equity release.
Understanding Equity Release
Equity release comes in two forms: home reversion or lifetime mortgage. As most Baby Boomers do not want to sell their homes, home reversion is a last option. It requires the partial sale of the home. Additionally, the market is turning more towards equity release in the form of lifetime mortgages.
While not ideal, lifetime mortgages hold off any monthly payment until death or the homeowner decides to move to a care facility. The homeowner could also decide to sell and buy a new home, while transferring the lifetime mortgage with them. With lifetime mortgage products interest is compounding. Each year the interest adds to the balance of the loan until the loan and all interest is paid off in full.
It gives homeowners a chance to live out their life in their London home they worked so hard for and share memories in. Anyone over 55 can obtain a lifetime mortgage and there are different types. The amount released in the mortgage is dependent on the value of the home or the loan to value (LTV) including the calculation of the interest that will accrue.
Interest Accrual on Lifetime Mortgages
The interest is at a fixed rate. By using equity release calculators you can decide how much you can take out in a loan, the interest rate, the total of the loan upon death, and discover if it is the right equity release solution for you.
Lenders are not going to allow the full value of the home to be taken out in equity to ensure there is no problem later with negative equity. Whether you are a socialite, foodie, or the older generation that believes in pinching pennies, there is a way to open up life again. You can still enjoy entertainment in the form of a London theatre, eating out, or helping out your children and grandchildren. London equity release ensures you can use the money as you desire.
There are disadvantages, but the tax free cash, no repayment, and age advantages make up for them. Simply look around for equity release calculators to discover if equity release is an affordable choice for your London Baby Boomer status!