What is Equity Release?
Equity release is a means of accessing the wealth tied up in your property. The term ‘equity release’ is generic in that it applies to many forms of equity release schemes which embrace the mechanism of releasing equity from the bricks and mortar of a residential property.For the over 55 age group, equity release plans allow the release of equity (tax-free cash) in the form of a capital lump sum, or a series of drawdowns which can be taken as little and as often as needed. The choice of how to spend the money is at the discretion of the homeowner and therefore no limitations apply. Equity release can make a significant improvement to the standard of living for the 55+ age group by enhancing their lifestyle in many ways. To find out how equity release has affected retirees lifestyle’s click here. In principle, equity release schemes come in two formats: –
Lifetime MortgageLifetime mortgages are a type of mortgage secured on your property which can be your main residence, 2nd home or even a holiday home. The property remains 100% in your own name and you are free to live in the property for the rest of your life. A lifetime mortgage is usually repaid upon the death of the remaining homeowner, or them moving into long term care. At that point the property is sold and the lender repaid from the sale proceeds, with any remaining equity passing to the beneficiaries. There are many flexible options which can be included with lifetime mortgages, which provide the facility to: –
• Make repayments either on an ad-hoc or regular basis via voluntary or monthly payments to control the future balance
• Protect an element of equity by including an Inheritance Protection Guarantee which safeguards a percentage of the final property value
• Take future tax-free cash withdrawals on a drawdown lifetime mortgage basis following the creation of an initial cash reserve facilityFurther information on the advantages and disadvantages of lifetime mortgages.
Home ReversionHome reversion plans allow you sell a percentage of the value of your property in return for a tax-free cash lump sum, or series of capital amounts. The home reversion provider offers a lifetime tenancy to the homeowners, enabling them to live rent free in their home for the rest of their lives. There is no rent to pay and the cash received can be spent on anything the homeowner wishes. By selling a percentage of the value of the house means you are effectively ring-fencing part of its final value for your beneficiaries, regardless of future house prices changes. This occurs once the last person has died or gone into long term care and the house is sold, whereupon the respective percentages are then divided accordingly between lender and beneficiaries. Further information on the advantages and disadvantages of home reversion plans.
Matters to ConsiderThe decision as to which equity release scheme is best for you will depend on your personal circumstances and your requirements. Lenders will only accept an equity release application following advice from an authorised and qualified equity release adviser. Therefore, to obtain impartial advice on which equity release schemes is best for you then independent equity release advice should always be obtained from companies such as Equity Release Supermarket. Our advisers will provide quality advice from the whole of the market, with no pressure. This allows you to make a decision in your own time, either in the comfort of your own home, or over the telephone, whichever suits. We would also recommend this subject of releasing equity be discussed with your beneficiaries. To discuss what equity release can do for you, please contact the Equity Release Supermarket team on Freephone 0800 678 5955 or email firstname.lastname@example.org
Further Information on Equity ReleaseReleasing equity from your property is an important decision to make and not only affects you financially, but equity release can also affect the future inheritance of your beneficiaries. Therefore, it’s important that best advice is sought due to the complexity and variations between all equity release schemes.
These are lifetime mortgage schemes and home reversion plans. To understand their risks, please ask for a personalised Key Facts Illustration.Further useful links regarding ‘what is equity release’ can be found here: –