What is Equity Release?
The following factors will normally come into any scheme falling under the definition of equity release for older homeowners:
A minimum age - usually 60 but it can be as low as 55.
You continue to live in your home for as long as you want.
You receive a guaranteed tax-free cash sum or income for life.
You have the freedom to move to a suitable property and without financial penalties should you wish to do so in the future.
There are no repayments required until your home is sold. This is normally on death or entering long-term care.
Your estate will not be liable for any debt beyond the property value regardless of future house prices.
One definition for equity release is the transfer of an interest in your home to a third party in exchange for cash benefits whilst continuing to live in your home. The value of the property less the value of any other interests is known as 'free equity'. With an equity release scheme you will be able to convert a proportion of that equity for your own use. The two principal methods are home reversions and lifetime mortgages.
Deciding to take out an equity release plan
If you decide to go ahead it is reassuring to know that you are not alone. Many thousands of older homeowners enter into arrangements every year. They can improve their lifestyle and do things they previously thought would be impossible. A specialist adviser can help you through the process and will be sympathetic to your personal situation and ensure that you are fully aware of your position when using your home as capital.
A Checklist for Equity Release
Have you considered alternatives, such as selling your current home and moving to a smaller property?
Have you considered information on the two main options of home reversion and lifetime mortgages?
Have you discussed the matter with your family, including how the value of your estate and any potential inheritance could be affected?
Do you understand the advantages and disadvantages of any plan you are considering?
Have you obtained confirmation of the costs involved in setting up the plan, including any fees charged by your solicitor and financial adviser?
Has the adviser explained the risks involved with the scheme? As a minimum you can expect information on how inflation and changes in property prices could affect you, any restrictions on moving or someone moving in with you, the impact of any roll up of interest or any other interest which reduces any inheritance you wish to pass on, how your state of health may affect the plan and the loss of State benefits. A suitably qualified equity release specialist will be able to advise you on all these matters.
Do you know what safeguards and guarantees are in place to protect your interests?
Equity Release Resources