Equity release plans are available to homeowners who are age 55 or over, and can be used to raise a tax-free lump sum or additional income from your property.
WHAT IS EQUITY RELEASE?
An equity release plan is a way of accessing the money tied up in your property without having to move home - your ‘equity’ is the value of your home, minus any outstanding mortgage. Because property prices have generally increased over time, many people’s homes are now worth more than what they paid for them, which means those at or approaching retirement could have more money tied up in their home than from their savings and income.
WHAT ARE THE FEATURES OF EQUITY RELEASE PLANS?
The money that you release is tax-free and can be spent in almost any way you want, plus there are typically no repayments to make unless you wish to. With lifetime mortgages, the most popular type of equity release, you continue to own 100% of your home and the plans are ‘portable’ which means that you can still move home in the future if you wish.
All plans come with a no-negative equity guarantee, so you can never owe more than your home is worth, plus some plans include options to guarantee an inheritance for your beneficiaries.
Specialist equity release advice is essential in order to discuss the effect on the amount of inheritance you can leave, and if your entitlement to means-tested benefits could be affected now or in the future. Other important things to consider are whether there are any alternatives to equity release, such as downsizing, or if there could be early repayment charges should you wish to pay off an equity release plan early.
EQUITY RELEASE CAN BE USED FOR MANY REASONS, INCLUDING:
- Paying for care
- Clearing any outstanding mortgage on your property
- Making home improvements
- Paying off any credit cards or loans
- Enjoying a more comfortable retirement
- Purchasing one-off items such as a new car or holiday
- Helping out friends or family members
TYPES OF EQUITY RELEASE PLANS
You can release a lump sum of cash from the value of your property, whilst maintaining 100% ownership of your home. There are no monthly repayments to make as the amount released, plus any interest accrued, is repaid from the sale of their property when you pass away or move into long-term care.
Drawdown Lifetime Mortgage
This is similar to the standard lifetime mortgage, but with more flexibility on how you take your money. Rather than just receiving a one-off lump sum, you can release your cash over time, as and when you need it. Because you only accrue interest on the cash you have taken, this can be a more cost-effective way to release equity.
Interest-Only Lifetime Mortgage
This is like a standard lifetime mortgage, however you can choose to make repayments in full or on an ad-hoc basis to reduce the effect on the value of your estate. Some plans allow you to make repayments that are equal to or less than the amount of interest that is charged. The balance is paid off from the value of your estate once you have died or moved into long-term care.
Home Reversion Plan
A home reversion plan allows you to exchange the ownership of your property for a lump sum of cash, and the right to stay in your property, rent free, for the rest of your life. Because you can continue living in your home rent-free for life, you would generally receive an amount for your property that is lower than its market value.
WANT TO KNOW MORE?
We work with one of the UK’s leading equity release specialists, Age Partnership. Their qualified advisers can help you decide if it’s right for you and search the market for the scheme that best meets your individual needs and circumstances.
Simply get in touch with us for more details, or use Age Partnership’s equity release calculator to find out how much you could release from your home.
Equity release may involve a lifetime mortgage or home reversion plan. To understand the features and risks ask for a personalised illustration.