What is Equity Release? Equity Release provides home-owners over the age of 55 with the facility to release money from their home, which they live in as their main residence to supplement their income without necessarily having to make any monthly repayments.
What can Equity Release be used for? Equity release can be used for a variety of purposes. These can include: * Adapting / improving your home to enable you to remain living in it independently for longer * Paying off debts, such as outstanding mortgages or credit cards * Paying for help around the home, including domiciliary social care * Purchasing a new car or other ‘large ticket’ item * Providing financial assistance to your children and grandchildren – perhaps with a deposit on a house or to help them through university * Taking a holiday of a lifetime, perhaps to visit family living overseas
I’m interested in Equity Release; what do I do next? As a fully qualified equity release adviser we can explain what is involved, discuss the options available to you and the implications regarding your state benefits and tax obligations. Each individual’s circumstances need to be assessed and this is why financial advice is a must in the process. Always look for a Financial Adviser who is a member of the Equity Release Council to be assured that you are dealing with a fully qualified and experienced individual, who has voluntarily signed up to and demonstrates the Principles of Membership ensuring that you, the customer experiences the highest possible standards when considering your options. Part of your choice as a customer will be over the type of plan that most suits your needs. In the modern equity release market there is a wide range of products covering your specific needs and your equity release adviser will be able to help you choose the one that will suit you best, now and in the future. If possible, talk your intentions over with your family.
What types of Equity Release products are available? There are two main types of equity release: Lifetime Mortgages and Home Reversion plans. Both types are regulated by the Financial Conduct Authority (FCA). By using an equity release product, a home owner can draw a lump sum and/or regular smaller sums from the value of their home, while continuing to remain living in it.
Lifetime Mortgage A Lifetime Mortgage is a type of mortgage where you can choose to extract your funds in a single lump sum and/or in smaller amounts over time up to the maximum limit agreed with the plan provider. You retain full ownership of your home and any interest on the loan can be paid or rolled up. The loan and any interest is repaid by your estate when you either die or move to permanent long term care. If you are part of a couple, the repayment is not made until the last person living in the home either dies or moves to long term care. In other words, both you and your partner are free to live in your home for the rest of your lives. You can also elect to retain some of the value of your property as an inheritance for your family, meaning that you can benefit from releasing equity while ensuring you have something to pass on to your children.
With some plans you can make monthly interest repayments in part, or in full. That way, you can maintain the debt to the initial capital before interest. If you choose to make interest repayments, you still have the option to move to a roll up arrangement at a later date if you wish, but always discuss details with your plan provider. How much can be released is dependent on your age and the value of your property. Some providers may offer larger sums to those with certain past or present medical conditions.
Home Reversion Plan A Home Reversion plan also allows you to access all or part of the value of your property while retaining the right to remain in it, rent free. With Home Reversion, the provider will purchase all or a part percentage of your house. You will know precisely what portion of your property you have parted with and, equally, what has been ring-fenced for later use, possibly to leave in a Will. The percentage you retain will always remain the same regardless of the change in property values, unless you decide to take further cash releases. At the end of the plan your property is sold and the sale proceeds are shared according to the remaining proportions of ownership.
Again, depending on your age and medical conditions, you may be able to access more funds. You will be provided with a tax free cash lump sum (or regular payments) and a lifetime lease, guaranteeing you the right to stay in your property rent-free for the rest of your life. There is no day to day interference and no restrictions in treating the house exactly as before; as a private home to live in freely.
Robin and Yvonne
A lifetime mortgage meant they could stay in an area they loved, close to their friends and family. This is their story.
Jim and Gill
Releasing the equity in their home, meant they could help their granddaughter with the deposit for her first home.
Using a lifetime mortgage to release equity from her home, means Pam can continue to do the things she loves in retirement.
Releasing equity from your home may reduce your right to state benefits both now and in the future, and will reduce your estate on death. You may also not be able to release additional money from your home in the future.
A fee of £695 is payable at completion of the transaction for our advice, research and administration service. This is for lifetime mortgage and home reversion schemes only.
David S Lowe Financial Management is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk/register/) under reference 458258.
The FCA do not regulate some forms of Mortgages.
For advice on any of the above, Contact Us now.