Can equity release mechanisms fund long term care costs?

Document description

This paper attempts to explain why equity release products have rarely been used, up to now, to solve the problem of funding long term care for the elderly. A significant influence is elderly people's reluctance to use the equity in their home. Equity Release Mechanisms (ERMs). The majority of people in the UK save over their working lifetime to buy a house and pay off the mortgage. 70% of people live in owner occupied accommodation. Over the years they have made considerable amounts of capital appreciation as house prices have steadily increased with only a few downturns in value. However, though they are asset rich their wealth is tied up in the house. Equity Release Mechanisms (ERMs) are financial schemes, normally mortgage or reversion based which enable a householder to draw down some of the equity in the house. The amount drawn down is repaid when the houseowner dies or moves out of the house. Repayment can be deferred till the death or exit of the plan holder or a surviving spouse.