Despite recent ups and downs in property prices our homes are usually our biggest asset. On average, house prices have roughly doubled every 10 years since 1974. As a result, many millions of Britons who have reached or are approaching retirement age now find themselves with a wealth of equity that far outweighs that of their savings and income.
What is equity release?
The value of your home, minus any mortgage you may owe, can be described as your ‘equity’. Many people choose to leave it tied up in their property throughout their lives. However, more and more people are now choosing to release some of this equity and turn it into a lump sum of money.
How does it work?
An equity release plan enables homeowners like you to unlock some of this value as tax-free cash.
Do I have to make monthly repayments?
With the most popular type of equity release plan, a lifetime mortgage, you don’t have to make any regular monthly repayments. Instead, interest is rolled-up against the loan so that you have nothing to pay during your lifetime. Then when you pass away, or move into long-term care, the house is sold and the loan, including the interest, is paid off with any remaining money passing to your estate.
Will I retain ownership of my home?
A lifetime mortgage plan allows full home ownership. These plans are the most popular with over 55s considering taking out equity release.
However, homeowners who choose to take out a home reversion plan, sell a percentage or all of their home in exchange for a lump sum of cash, along with the right to stay in the property, rent free for as long as they live.
What if I want to move home?
All equity release plans offered by lenders that are members of the Equity Release Council are portable. This means that the plan can be moved to another home, so long as the new property is acceptable to the lender, based on their criteria at the time.
However, if downsizing to a lower valued property on a lifetime mortgage for example, the lender may require part of the loan to be repaid in order to keep it within their limits at the time.
How will this affect my children’s inheritance?
Whilst releasing equity will reduce the overall value of your estate, there may still be some left for your beneficiaries to enjoy. Furthermore, some lenders offer inheritance protection guarantee on lifetime mortgage plans which allows you to safeguard a percentage of your home’s value.
The Equity Release Council introduced vital safeguards for customers in 1991 that still stand today. These safeguards guarantee that the homeowner has the right to remain in their own home until the last owner dies or moves into long-term care, and there is a ‘no-negative equity guarantee’, which means that you can never owe more than the value of your home.
What can I spend the released funds on?
Popular uses include home improvements, holidays, new cars and helping the family, although it is a requirement to pay off any mortgages with the released equity.
How much can I lend?
The amount you can lend depends on your age and the value of your property. However, some lenders will also take into account your health and lifestyle. To receive an estimate now follow this link here
For any further information on equity release;
Call: 0800 980 4663
Age Partnership provides initial advice for free and without obligation. Only if you choose to proceed and your case completes would a typical fee of 2.2% of the amount released be payable.
Equity release requires paying off any existing mortgage. Any money released, plus accrued interest would be repaid upon death, or moving into long-term care.
Equity release may involve a home reversion plan or lifetime mortgage which is secured against your property. To understand the features and risks, ask for a personalised illustration.
Your entitlement to means-tested state benefits may be affected and your estate may reduce.