What is Equity Release?
If you're over 55, equity release enables you to access the cash that's tied up in your home without having to move. You're free to use the money for anything you want - from home improvements, a holiday, a new car to paying off debts or making gifts as part of an inheritance tax strategy.
Equity Release is tax-free cash from stored-up equity, providing funding to
achieve dreams in later life.
The most common form of Equity Release is Lifetime mortgages. Unlike other forms of Equity Release, this type of plan offers much more security to the homeowner, such as total
ownership of the property throughout the life of the mortgage, being able to downsize and move to another property and a guarantee that you cannot
owe more than the value of the property at the end of the plan.
How does Equity Release Work?
The amount of tax-free cash you can release depends upon two main factors. The age of the youngest applicant and the value of the property, which is established by having a professional valuation carried out which is typically free. Some lenders may take into account underlying health issues when calculating how much is available.
Many modern plans also allow a large degree of flexibility in that the homeowner or their family can actually pay, in most cases, up to 10% of the initial sum borrowed to reduce the loan over time and preserve the remaining equity and protect any future growth in property value. If clients would prefer not to service the loan, the lender simply adds interest to the sum borrowed monthly or annually at a rate typically fixed for life.
Only when the surviving borrower either passes-on or moves into long term care does the loan become repayable. The beneficiaries of the estate can either sell the property and repay the loan from any proceeds or retain the property and repay the loan from other sources. Payments are not mandatory and are simply down to the choice of the customer.
The other main form of Equity Release is called Home Reversion plans. These involve selling part or all of your property to a lender and remaining in the property until death or going into long term care. At Gaia Financial we believe our customers should at all times retain ownership of their properties and so we decline to advise on these plans.
'Equity release includes Lifetime Mortgages and Home Reversion Schemes. We can advise and arrange Lifetime Mortgages and will refer to an approved specialist for Home Reversion schemes.
Equity Release isn't right for everyone, it can affect your entitlement to state benefits and local authority support. It's really important you speak with a specialist equity release adviser to make sure this is the right option for you and your family.
Kate Furzer
Speak to a qualified adviser today.
Find out if equity release is right for you.
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In this complex area, it’s really important to explore all your options before you sign up for a lifetime mortgage
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Equity release can be used to support your retirement in later years and it may reduce potential inheritance tax in the right circumstances. However, it’s usually the last resort – and we recommend that family members are involved in our discussions to ensure that other options such as downsizing are explored.
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Lifetime mortgages tend to have a higher rate of interest than ordinary mortgages. And home reversion plans don’t offer anything close to the true market value of a property. Set-up and arrangement fees can be costly too.
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Equity release can affect your entitlement to state benefits and local authority support – and it may also have tax implications.
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The aim of a specialist equity release adviser is to make sure the product chosen is right for you we want to make sure you receive the correct advice.
