Equity release schemes are especially designed for older homeowners. These schemes offer a lump sum amount of money or a regular income against the value of your home. One of the best things about these schemes is that they allow you to live in your home for the rest of your life.
Another important feature about equity release schemes is that they offer a tax-free amount of money by unlocking the equity in your home. This means that you can spend the cash in any way you want without an income tax liability.
How much money you can release against your home?
The lump sum amount of money varies from a minimum release of £10,000. The maximum release is determined by two factors: -
- Age of the youngest homeowner
- Valuation & type of property
If you want to know how much can you release as you can see the important factors are your age, house value and outstanding debt. Nowadays, most people use an online equity release calculator to know the amount they can release.
Click here to calculate your maximum release.
Nevertheless, it is not always advisable to apply & release the maximum equity release possible.
In every equity release case, advice must be provided by a qualified equity release adviser such as Equity Release Supermarket. The reason for this is that equity release schemes are regulated by the Financial Services Authority & most lenders who offer such schemes are also members of SHIP (Safe Home Income Plans). These levels of protection are essential in guaranteeing quality advice to people over 55 years of age.
Equity Release Supermarket advisers would only recommend you take an initial amount that would be required initially for the first 12 months from application. This is to reduce the impact of the roll-up effect of the equity release scheme over the longer term. By taking the maximum release from outset & having no plans for its expenditure would only leave the excess funds languishing in a savings account. With today’s interest rates this would not be financially savvy as the rate on the equity release scheme would be 3%+ higher than that of the savings account!
A more cost effective way of releasing equity in these circumstances would be by a drawdown equity release scheme. Here a cash reserve facility is provided by the lender. From this, you can take an initial release depending on your first 12 months expenditures. The remaining reserve funds can then be withdrawn as & when demand is required.
By taking this equity release route would mean that less interest is paid as you are drawing down a smaller amount & then ad hoc smaller payments over the years.
This is much better financially for beneficiaries also as there is also potentially a lower balance thus resulting in a greater inheritance for them in the future.
If you have decided to opt for an equity release scheme, you must consult an advisor who will help you fill in the documents. There are some factors which need to be considered before releasing the cash against the property.
- The homeowner must be over 55 years of age
- There should be little or no outstanding mortgage
- The property should be worth at least £70,000
Subject to this criteria being met then the next stages of the application process can be achieved & your equity release adviser will explain the forthcoming stages to complete the whole process.
If you need assistance with equity release calculations, please contact Mark on 0800 678 5159 or visit the Equity Release Supermarket website by clicking here.