• Property worth: £550,000
• End of interest only mortgage and in need of debt consolidation
Mr Jones has reached the end of his Interest Only Mortgage term and a well known high street bank had initially allowed Mr Jones to either re-mortgage or sell his home. Despite several requests for an extension made by Mr Jones, they were all turned down.
DEBT: In addition to Mr Jones' outstanding mortgage of £74,000 where he pays £350 per month, he also has a credit debt of £22,000 where he pays £386 per month!! Mr Jones has completely exhausted his savings, leading to the increasing credit card debt to pay some general bills and essential purchases.
INCOME: He only has his state and workplace pension as income and his financial adviser has confirmed he is not entitled to any other benefits.
Mr Jones does not fit the criteria for a conventional high street mortgage due to failing affordability. Mr Jones' house in Winchester is valued at £550,000 and is a classic example of 'asset rich and cash poor'.
Mr Jones' objectives are to primarily clear his outstanding mortgage and pay off the credit cards to improve his surplus income. If possible, he would also like to have some emergency money kept aside. His financial adviser has recently become qualified in equity release. The adviser is able to discuss with Mr Jones with a new solution that enable him to acheive this surplus income. Firstly, Mr Jones and his adviser discussed all options before taking on another secured loan, such as asking family for help, if he was expecting any inheritance or any pensions he had not yet claimed. His adviser asked if Mr Jones if he would consider renting out a room in his house but Mr Jones did not like this idea and the other options they discussed were not applicable.
The financial adviser recommended an equity release plan / lifetime mortgage with an initial release of £103,000 to meet his immediate needs, with an additional drawdown facility of £90,000 to withdraw further funds if and when he needs – without accumulating extra interest. The adviser was able to show that with this solution, Mr Jones would be £779 per month better off!! Mr Jones can now carry on his retirement without the worry of not being able to put hand to mouth each month and staying in his home until he dies or goes into long term care.