Are you a homeowner approaching retirement or simply looking to unlock the value tied up in your property?
Equity release is a financial tool that allows you to access the wealth that has been built in your home without having to sell or downsize.
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While it’s not the right choice for everyone, there are reasons why it might be a suitable solution for your circumstances.
In this article, Andrew Morris, Senior Equity Release Advisor at Age Partnership, outlines four key reasons why equity release could be a beneficial option, helping you make an informed decision about your financial future.
“Equity release allows you access to an amount of money that’s currently locked in your home.
The money you unlock is tax-free, because it is essentially an advance on the value of the home, not earned income.”
“At the moment with current lender products, homeowners aged 55 and over may be able to access from £10,000 up to 53% of your property value.
How much you can access depends on factors such as your home’s value, the age of the youngest homeowner and what you would like to release the money for.
These are all questions that I, as would any good advisor, will ask at the onset of your conversation to make sure it could be right for you.”
“When I speak with my clients it’s important to understand what they intend to use this money for. This helps them avoid releasing too much and having unnecessary interest build up.”
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“As mentioned, it’s important to know what you would like the money for before speaking to an advisor about equity release so they can help you release the right amount for your needs.”
“What you can spend the money on is pretty flexible, and in many cases, my clients want to release funds for making home improvements, buying a new car, going on holiday or gifting to loved ones. These are all perfectly acceptable reasons.”
“One of the requirements is that you must first repay any existing mortgage with the money you release, and an advisor will help you work out how much you might need to do this and achieve any further goals too.”
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“There are two main types of equity release, a lifetime mortgage and a home reversion plan. The most popular option for my clients is a lifetime mortgage.”
“The main difference between the two is that a lifetime mortgage is secured against your property, and you maintain 100% home ownership.
There is also no requirement to make monthly repayments as the equity released, plus accrued interest, is repaid when you die or move into long-term care.”
“With a home reversion plan, you must sell a share of your home, and can continue living in it rent-free until you die or move into long-term care.”
“With either plan, you can choose whether you would prefer to take the money you release as a lump sum or a smaller amount when you need it.
Both options will also reduce the value of your estate and impact funding long-term care.”
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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.
“You might be concerned about what impact equity release would have on your inheritance. There are plans that allow you to safeguard a percentage of your property’s value so that you can pass this on to loved ones.”
“Plus, plans that meet the Equity Release Council’s standards come with a no negative equity guarantee, which means that your estate will never owe more than your property is worth when it is sold.”
“As equity release is a financial decision, advice is required before proceeding. Your advisor will be able to talk you through all the different features so you fully understand what your options are, and which plan could be right for you.”
Through Age Partnership, initial advice is provided for free and without obligation.
Only if your case is completed would an advice fee of £1,895 be payable.
Other lender and solicitor fees may apply.
Find out how much you could unlock with Age Partnership here
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.
