What is Equity Release?

Equity release simply lets you release some of the money you have in your home without having to move.

Equity release schemes are usually available as either a lifetime mortgage or a ‘home reversion plan’.

Lifetime mortgages allow you to release part of your equity, which is repayable on death or the sale of the property, along with the rolled-up interest. The amount repayable depends on the initial sum borrowed and the number of years before the loan is repaid.

With a home reversion plan, you sell a percentage of your property to the equity release provider, at a discount to its current market value.

You can continue to live in your home rent-free, but on your death or the sale of the property, the provider reclaims its share in the property plus any growth in its value.

Who is Eligible for Equity Release?

Equity release is usually only available for borrowers aged 65 and over, although a few lenders will consider applicants from 55.

The schemes are most suited to those who are asset-rich and cash-poor, particularly if they have no children or other dependents to benefit from their estate on death.

Lifetime mortgages are considered more suitable for older borrowers as there is likely to be less interest rolled up before death or sale of the property, but of course there is no way of telling how long you will live, so the interest could still be significant.

Although a no-negative guarantee would ensure you never owe more than the value of your home, interest payments could eat up much, if not all, of the remaining equity.

What are the benefits of Equity Release?

You could release money from your home to help you do what you want in your retirement.

You can continue to live in your home until you die or go into long term care.

You could release money from your home to help you do what you want in your retirement.

With the Home Reversion Plan if you sell less than 100%, you will be able to guarantee an inheritance for your family from the sale of the property. The value of your share will be paid to you or your estate at the end of the plan. The benefit of this method is that you sell only a fixed percentage of your home, albeit at a discount.

Things to take into consideration when considering Equity Release

If you are using the equity that is released to supplement your income, you need to check whether it might result in a reduction in your entitlement to some state benefits. Overall, much will depend on the options open to you and how acute your needs are.

If you are considering equity release you should always seek specialist advice, and ensure the provider is a member of SHIP (Safe Home Income Plans) – as a member, it will have to adhere to a code of practice.

Minimum age and property values apply. You should also note that there are restrictions on the type of property we will accept for equity release.

If you have an existing mortgage on your home, or any secured loans, you would have to use the money you release to pay these off first, but then you would be free to spend the remainder as you wish.

What should I do next?

We encourage you to involve your family in the decision process and would ask if you would like for them to attend any of the appointments you may have with your adviser.

Equity Release is a big decision, so we will look at all of your options before deciding if Equity Release is right for you.

If you would like an initial meeting to ascertain what Equity Release options are available to you, please give us a call on 01489 580020.

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