Equity release is becoming a popular method of funding your retirement by releasing the cash (or equity) that is locked up in your home. The increase in values of property over the last 20 or so years means a lot of people in retirement may become asset rich, but cash poor. An equity release plan is just one method of balancing your finances, which may give you an income, or lump sum in retirement.
If you would like to release money from your house to receive a lump sum or extra money over a period of time then you may want to consider an equity release plan. You can use the money as you wish.
To qualify for equity release, typical criteria includes the following:
- Be aged 55 to 95 (unless you have a shortened life expectance)
- Own equity in a residential property worth £50,000
- Be living in the UK
Am I eligible for equity release?
If you meet the criteria above, or think you may in the future; you are likely to be eligible for equity release. Make a FREE and quick equity release mortgage enquiry below to speak to Neil, our equity release specialist.
Equity release is a means of retaining use of your house or other object which has capital value, while also obtaining a lump sum or a steady stream of income, using the value of the house.
Why Consider Equity Release?
- You continue to live in your home and still maintain 100% legal ownership
- It can provide a tax free lump sum to support you through retirement
- Make no monthly repayments – lender require no monthly payments towards the interest charged
- No negative equity – you can never end up owing more than the value of the property
Drawbacks of Equity Release
- Your estate will be reduced – when you die or move out permanently, your property may need to be sold to repay the scheme provider first. Any extra money let over will then be shared under your instructions. While you can ring-fence some of the value of your home, this will reduce the amount of equity you can release.
- Your benefits may be affected – releasing cash from your home will increase your income or savings and that in turn may affect your entitlement to state benefits.
- There are fees to pay – you may have to pay arrangement fees and for independent professional advice
Although there are many different plans available, they can all be split into four main categories of equity release schemes.
You release a lump sum from the value of your property, whilst maintaining 100% ownership of your home. This amount, plus any interest accrued, is repaid from the sale of your property when you pass away or move into long-term care.
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
Drawdown Lifetime Mortgage
This works similar to Lifetime Mortgage but with a regular cash reserve/draw down option allowing you to withdraw amounts at a frequency you choose up to a specified amount of years, or until the cash reserve has been used up.
Interest-Only Lifetime Mortgage
You get a lump sum and pay a monthly interest on the loan, which can be fixed or variable, rather than allowing the interest to roll up. The amount you originally borrowed is normally repaid when your home is eventually sold.
Home Reversion Plan
Here, you sell some or all of your property in exchange for a lump sum of money, whilst maintaining the right to remain living in your home, rent free, for as long as you live.
For more information on our home reversion plans, please ask us about the home reversion requirements.
What can an equity release be used for?
You are free to use the money on almost anything you choose. There are many reasons for releasing equity from your home and here are just a few of them:
- Supplement your pension income to cover living expenses
- Settle a repayment mortgage or clear the balance on an interest-only mortgage
- Improve your standard of living
- See your family enjoy their inheritance while you’re still here
- Carry out some home improvements
- Take that holiday of a lifetime
- Help your children onto the property ladder
- Pay off other outstanding debt and lower your monthly outgoings.
Is an Equity Release right for me?
Equity release plans are not right for everyone and it is important that you fully consider your options and receive independent financial advice before making a decision. It is also important that, if you do decide to use an equity release product, you choose one that meets your needs.
Remember that taking an equity release plan is generally a long term option. However, there are flexible plans available that may fit your varying needs and some will allow you to repay in the future without any penalties. A financial adviser can help you to choose the plan that is right for you.
*Our charges are usually the greater of £1,950 or 1% of the loan. For example, our fee charged on a loan of £250,000 would be £2,500.