Equity Release - unlocking money from your home
If you are aged between 55 and 95, a homeowner and you want to access additional funds for whatever purpose, then you may be able to release cash from the value of your home. This is known as equity release and can be arranged through a Personal Equity Plan, negotiated and tailored to meet your particular circumstances and needs.
There are many providers (lenders) nationally offering a variety of plans, all of which have in common, the loaning of money to you for the remainder of your lifetime, in exchange for them taking part of the equity of your home. Their offer of a plan starts with consideration of two factors; the age of the homeowner (and if the home is owned by two or more people, the age of the youngest one), and the value and condition of the property, for which a survey will eventually be required.
According to the Safe Home Income Plans (SHIP) industry body, 80% of equity release plans are now sold through advisers, compared to the remaining 20% being sold direct by lenders.
The first step towards making a choice is for you to be certain that you want the extra cash. If so, you should consider all options, which might include selling your home and moving to a cheaper property; asking your family for assistance; other loans and using other investments or savings you might have.
It is likely to be important to involve your family in these discussions. If equity release seems the best option for you, this choice is made on the understanding that all Equity Release Plans reduce the value of your estate and may affect receipt of state benefits like pension credit or council tax benefit.
There are two main types of equity release plan currently available:
1)A lifetime mortgage – a loan with no monthly payments until the surviving homeowner enters long term care or dies. The loan repayment plus interest is then made from the sale of the house.
2)A home reversion scheme – usually only available when the youngest homeowner is 65, when all or part of the home is sold to a reversion company for a lump sum, with the homeowner living on in the house rent free for the rest of their life. The sale of any remaining part of the house will be part of their estate.
In both these forms of equity release, a range of products are available with different features, including the fees and interest rates (variable and fixed) charged; the release as a cash lump sum or spread as monthly payments and whether or not there will be a penalty charge if you pay back the loan early.
If you are considering equity release, we can help you through these processes towards a personal illustration for your equity release plan and help you understand its features.