Equity release enables homeowners who are aged 55 and over to access some of the money tied up in their homes.
You can take the money as a lump sum or in several smaller amounts. Many people choose this option to supplement their retirement income, make home improvements or help children or grandchildren get onto the property ladder.
Lifetime mortgage
The most common way to release equity from your home is through a lifetime mortgage. This allows you to take out a loan secured on your property, provided it’s your main residence. You can ring-fence some of the property value as inheritance for your family and you can choose to make repayments or let the interest roll up. The mortgage amount, including any interest, is paid back when you die or move into long-term care.
Home reversion
A home reversion plan lets you to sell all or part of your home for a lump sum or regular payments. You can continue living there rent-free until you die, but you’ll have to pay to maintain and insure it. You can ring-fence some of the property for later use. At the end of the plan, the property is sold, and the proceeds are shared according to the remaining proportions of ownership.
Is equity release right for you?
Deciding to release funds from your home isn’t a decision to take lightly. While equity release means you have money to spend now instead of leaving it tied up in your property, it can be a complicated process. Remember equity release often doesn’t pay you the full market value for your home. And it will also reduce the amount of inheritance your loved ones could receive. It’s important to talk to an adviser who can help you decide whether the process is appropriate for you.
A Lifetime Mortgage is not suitable for everyone and may affect your entitlement to means tested benefits, so it is important to seek financial advice before taking any action. If you are considering releasing equity from your home, you should consider all options available before equity release.
The interest that may be accrued over the long term with a Lifetime Mortgage, may mean it is not the cheapest solution. As interest is charged on both the original loan and the interest that has been added, the amount you owe will increase over time, reducing the equity left in your home and the value of any inheritance, potentially to nothing.
Although the final decision is yours, you are encouraged to discuss your plans with your family and beneficiaries, as a Lifetime Mortgage could have an impact on any potential inheritance. We would also encourage you to invite them to join any meetings with your Financial Adviser so they can ask questions and join in the decision, as we believe it is better to discuss your decision with them before you go ahead. This is a referral service.