All You Need to Know About Equity Release
Equity release schemes are becoming an increasingly popular way for retirees to access the money tied up in their homes. But what exactly is equity release, and how does it work? This blog post will explore these questions and more. Stay tuned!
Equity Release – What Is It?
In a nutshell, equity release is a way of accessing the money you have tied up in your home without having to move out or downsize. There are two main types of equity release: lifetime mortgages and home reversion plans.
With a lifetime mortgage, you take out a loan against the value of your property. The loan is repaid when you die or move into long-term care. You can either make monthly interest payments or let the interest ‘roll up’, which means it’s added to the loan amount and repaid when the loan is due.
With a home reversion plan, you sell all or part of your property to a provider in return for a lump sum or regular payments. The provider will usually offer you a proportion of the property’s future value, so you won’t get as much money as if you sold it on the open market. When you die or move into long-term care, the provider owns the property and can sell it to repay the loan.
Equity release is only available to people over the age of 55. The exact age limit depends on the provider and the type of equity release product.
How Does Equity Release Work?
If you’re considering equity release, it’s important to get advice from a financial advisor who is qualified to give equity release advice. They will be able to assess your individual circumstances and advise you on whether equity release is right for you.
If you decide to go ahead with equity release, your provider will value your property and offer you a loan based on a percentage of its value. The amount you can borrow will depend on factors such as your age, the value of your property and your health.
You can usually choose how to take the money from your equity release plan. You can take it as a lump sum, or in smaller amounts over time. Some plans also allow you to make ‘drawdowns’, which means you can take money out when you need it, up to a certain limit.
The money you borrow with an equity release plan is usually repayable when you die or move into long-term care. However, some lifetime mortgage products allow you to make partial or full repayments early, without incurring any penalties.
What Are the Pros and Cons of Equity Release?
Like any financial product, equity release has its pros and cons. It’s important to weigh up these carefully before making a decision.
Pros:
• You can access the money tied up in your property without having to move out or downsize.
• You can choose how to take the money from your equity release plan, whether as a lump sum or in smaller amounts over time.
• Some plans allow you to make partial or full repayments early, without incurring any penalties.
Cons:
• Equity release will reduce the value of your estate, which could affect your eligibility for means-tested benefits.
• The interest on your loan may ‘roll up’, which means it’s added to the loan amount and repaid when the loan is due. This can increase the size of the loan and the amount of interest you pay over time.
• If you take out a home reversion plan, you could miss out on any increase in the value of your property.
• Equity release is only available to people over the age of 55. The exact age limit depends on the provider and the type of equity release product.
Is Equity Release Right for You?
Equity release can be a useful way to access the money tied up in your property, but it’s not right for everyone. It’s important to get advice from a financial advisor who is qualified to give equity release advice before making a decision. They will be able to assess your individual circumstances and advise you on whether equity release is right for you.
If you’re considering equity release, make sure you compare different products and providers to find the best deal for you. Use an equity release calculator to work out how much money you could release from your property.
We Can Help
If you’re considering equity release, our team of qualified financial advisors can help. We’ll assess your individual circumstances and advise you on whether equity release is right for you. We can also help you compare different products and providers to find the best deal for you.
Get in touch today to speak to one of our advisors.