Equity Release

We’ve been helping people release equity from their property for years. It’s not for everyone, but equity release does have a place in financial planning for older clients.

What is equity release?

In a nutshell, equity release is a way for home-owning individuals over the age of 55 to release money from the value of their home. It’s increasing in popularity and can be a great way to safely tap into your wealth without having to sell your home or move out.

Sounds simple, but there are actually lots of things to take into consideration. Whether it’s the right option for you depends on a whole host of factors: the value of your home, how old you are, how much you want to release, where you live, your income, your plans for the future.

It’s important to look at the long-term implications, not just the short-term boost. That’s why lenders will only accept an equity release application following advice from an authorised and qualified equity release adviser – like us!

The Equity Release Council

Ralph and Bob are members of the Equity Release Council, the industry body for the UK equity release sector. It “exists to promote high standards of conduct and practice in the provision of and advice on equity release which have consumer safeguards at its heart.”

In becoming members, they have signed up to the Council’s Statement of Principles. That means you can trust us to give the very best advice and guidance when it comes to deciding whether equity release is right for you, and choosing which arrangement will help you best meet your financial objectives.

Equity Release Council. Safe Equity Release since 1991

How does equity release work? 

There are two main types of equity release product:

  • Lifetime Mortgages (aged 55+): A type of mortgage that typically does not require monthly repayments. Instead, the interest is rolled up. The loan and the rolled-up interest are then repaid through the sale of your home when you die or move into long term care. Some plans will let you opt to make monthly repayments – this can help control the balance.
  • Home Reversion Plan (aged 60+): The provider purchases all or part of your home and will provide you with a tax-free lump sum and a lifetime lease. You retain the right to live in your property, rent-free, for the rest of your life.

In either case, the cash that you free up is yours to spend as you wish, be that supporting family members, funding for care, repaying debts, or just having the financial freedom to enjoy later life.

What are the pros and cons of equity release? 

As we’ve mentioned, whether equity release is right for you depends on your personal circumstances. Your adviser will take you through the pros and con of each option as it relates to your situation, but here are a few broader things to be aware of:

Pros of equity release:

  • Financial freedom – having money to spend as you wish which you may otherwise not be able to access
  • The money is tax-free
  • There’s no need to downsize – you can stay in your home for as long as you want to
  • It’s flexible – with a Lifetime Mortgage, you can take a lump sum, in smaller chunks, or a regular income
  • Your plan is portable – you can take it with you if you move house
  • There’s a “no negative equity guarantee” – if your house is worth less than the amount you owe at the time your plan is repaid, your loved ones won’t have to repay the difference to the lender so they are protected. This only applies to products under the Equity Release Council, but we would never recommend a product that wasn’t ERC approved.

Cons of equity release:

  • Reduces the value of your estate – there will be less to leave to your loved ones, although there are ways to minimise the impact on the value of your estate
  • Rolled up interest can add up – check what safeguards are in place with your plan
  • Hefty early repayment charges – a lifetime mortgage is designed for life! It’s important to check your plan for rules around early repayment
  • With a home reversion plan you are not likely to get close to the market value of your home.

WANT TO KNOW MORE ABOUT EQUITY RELEASE?

If you’re over 55, own your home, and would like to know more about equity release, please do get in touch with us. A member of the team will be happy to talk you through your options and guide you through the process.

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