Could equity release be right for you?
Equity release could help you boost your finances so you can live the life you deserve and achieve your retirement dreams.
Maybe you’re planning a once-in-a-lifetime holiday or making some much needed home improvements. Equity release could help you supplement your finances so you can live the life you deserve and achieve your retirement dreams.
But could equity release be right for you? Read on to find out more.
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Did you know that with a lifetime mortgage, the most popular type of equity release plan, you continue to own 100% of the home you love.
The money you release is also tax-free, and you can choose how you want to access this, whether that’s as a lump sum or over regular smaller instalments.
Plus, some equity release plans don’t require any regular repayments meaning once you’ve repaid any existing mortgage, which is a condition of equity release, you could free up your committed monthly expenses.
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How does equity release work?
Equity release allows you to unlock a percentage of the value of your home as tax-free cash. This is from a minimum of £10,000 up to around 50% of your home’s value.
There are two main types of equity release plan, a home reversion plan and lifetime mortgage, which is the more popular of the two. A home reversion plan selling all or part of your home in return for a lump sum or smaller amounts of cash over time, and it allows you to continue living in your home, rent-free.
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A lifetime mortgage is a loan against your home, and when you pass away or move into long-term care, your house is sold. The loan, plus accrued interest, is paid off with the remaining money passing to your estate at this point.
As the interest accumulates it can equate to a substantial portion of the property’s value when it is sold, as interest rolls up along with the capital, meaning equity is reduced.
However, some plans now allow the interest or part of the loan to be repaid earlier to lower costs. This is subject to certain limits.
Plans that meet the Equity Release Council Standards come with a no negative equity guarantee, meaning the amount of money you borrow against the value of your home, plus any rolled-up interest, can never go above the value of the property, and the remainder of the loan would be written off.
Your estate will never owe more than your property is worth when it is sold.
Additionally, with some equity release plans, you can ring-fence a portion of your property’s future value, to guarantee inheritance to your family.
How do I know if I qualify?
If you’re a homeowner aged 55 or over, and your home is worth over £70,000, you might be eligible for equity release.
Every lender has different qualifying criteria depending on your individual circumstances, which is why it’s important to speak to an equity release specialist to find out if you qualify, and how much you could release.
How much you can release will depend on various factors such as your age and the value of your home, along with your health and lifestyle.
Some lenders offer medically enhanced plans if you have some health conditions, meaning you may be eligible for certain plans and rates.
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The importance of advice
If you’re considering equity release, it’s important to discuss this with your family as it will impact the amount of inheritance you can leave.
Advice is required before proceeding with equity release, and a specialist broker can discuss all the options available to you. This includes what impact it could have on the size of your estate over time, as equity release will decrease this, and if your entitlement to current and future means‑tested benefits may be affected now or in the future.
Equity release may involve a home reversion plan or lifetime mortgage which is secured against your property and will reduce the value of your estate and impact funding long-term care.
To understand the features and risks ask for a personalised illustration.
Initial advice is provided for free and without obligation. Only if your case completes would an advice fee of £1,895 be payable. Other lender and solicitor fees may apply.
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READ MORE ON EQUITY RELEASE
If you're hoping to learn a bit more equity release, here are some more of our handy guides and explainers for you to read:
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