Could equity release work for you?

What is equity release?

Equity release lets homeowners aged 55 and over release tax-free cash from the value of their home. The amount you can release is based on your age and how much your home is worth. Depending on the equity release product you choose, you can claim your money as one big lump sum or as a series of smaller lump sums.

You can use the money you release however you like:

• Help your children with money difficulties or to buy their own home

• Live out your dreams of travelling the world

• Pay off your loans

• Make vital improvements to your home as you grow older

• Have some extra money to help you enjoy your retirement

 

There are two types of Equity Release, a home reversion plan and a lifetime mortgage.

 

Home Reversion plan

With a home reversion plan, you sell all or part of your property at less (usually between 20% and 60%) than its market value in return for a tax-free lump sum, a regular income, or both.  You stay in your home as a tenant, rent free, for a fixed amount or a figure that will increase by a specified annual percentage.

 

The older you are when you start a home reversion scheme, the higher the percentage you will get of your home’s market value.  

Lifetime Mortgage

A lifetime mortgage is when you borrow money secured against your home, provided it is your main residence, while retaining ownership. The home is still yours and you are responsible for maintaining it.

Interest is charged on what you have borrowed, if you have the financial means you can decide to repay this or add on the total loan amount. You do not have to repay anything until you die or move into long-term care.  The home is then sold and the money from the sale is used to pay off the loan. Anything left then goes to your beneficiaries.

Some equity release providers also offer a no negative equity guarantee. This means that the money you'll eventually need to pay back will never be more than the total value of your home.

If you wish to discuss your options regarding equity release and whether it is suitable for you, please get in touch.