3 days Ago By Chantelle Symester
Equity release is a financial product that allows you to access the equity tied up in your property. Here we answer equity release questions to help you find out more. The basics of equity release What is equity release? Equity release is a way for homeowners, aged 55 or older, to release money from the value of their home without having to move.
How does equity release work? There are two types of equity release, a lifetime mortgage and a home reversion plan. A lifetime mortgage allows you to borrow a portion of your home's value, whilst continuing to own your home 100%. The loan is secured against your home and the money you borrow, plus accrued interest, is repaid when you die or move into long-term care.
Read More You can choose if you would like to take this money in a lump sum, or smaller amounts over time. With a home reversion plan you sell part of your home in exchange for a lump sum, regular payments, or both. The difference here is that while you maintain the right to live in the property rent-free, you do not continue to own your home 100%.
Financial considerations The amount depends on your age, the value of your home, what you require the money for and even your health. Most read in Money Generally, the older you are the more you may be able to release from your home. Once you've repaid any existing mortgage, which is a condition of equity release, the money is yours to enjoy spending.
Costs can include arrangement fees, valuation fees, legal fees, and early repayment charges. Interest on a lifetime mortgage can also accumulate significantly over time. If you opt for a lifetime mortgage you continue to own 100% of your home.
With a home reversion scheme, you sell a portion of your home, so ownership is shared with the provider. When considering equity release, it's wise to speak with an equity release specialist who is a member of the Equity Release Council. This ensures you will be recommended plans which have certain protections in place such as a no negative equity guarantee, which means your estate will never owe more than your property is worth when it is sold.
EQUITY release can be a good way to unlock cash in retirement - but there are some dangers to consider, according to The Sun's Tara Evans . Interest rates on lifetime mortgages are around 5.5%, with some topping 8%.
This means they can be more expensive than a traditional mortgage and you should always consider downsizing first. You could end up owing more than you borrowed, although it will never be more than the value of your home. Using equity release to take cash from your home will reduce the assets you have to pass on to loved ones when you die.
It is a long-term commitment and you may be charged an early redemption fee that can be as high as 25% if you want to pay it off. Be aware that equity release could affect or stop your benefits. Always seek advice from a qualified equity release adviser.
Impact on future Yes, releasing equity will reduce the value of your estate and reduce the inheritance you can leave. It’s important to discuss this with family members, as it will also impact funding any long-term care that may be needed in the future. Some plans allow for voluntary early repayments subject to certain limits, and early repayment charges may apply above a set value.
It's important to understand the terms of your specific plan, which an equity release adviser will talk you through. Many lifetime mortgage products offer what is known as portability, allowing you to move the plan to a new home, provided the new property meets the lender criteria. Releasing equity may have an impact on your entitlement to means-tested benefits now or in the future.
In the case of a lifetime mortgage, the loan only needs to be repaid when you die or move into long-term care. READ MORE SUN STORIES For a home reversion plan, you retain the right to live in your home for life or until you move into long-term care. Equity release is a financial decision that should be considered carefully.
Advice is required before proceeding with equity release so you can discuss your options with a specialist advisor in more detail. It’s also worth considering if alternatives to equity release could be better, including downsizing, taking a lodger, using other savings or getting financial assistance from family members. A specialist advisor, such as those at Age Partnership , can provide initial advice with a free no-obligation quotation.
Only if your case is completed would an advice fee of £1,895 be payable. Other lender and solicitor fees may apply. Calculate how much you could unlock Age Partnership is a trading name of Age Partnership Limited, which is authorised and regulated by the Financial Conduct Authority.
FCA registered number 425432. Company registered in England and Wales No. 5265969.
VAT registration number 162 9355 92. Registered address, 2200 Century Way, Thorpe Park, Leeds, LS15 8ZB..
