What is Equity Release?
Equity release is a way to free up some of the equity/cash tied up in your property without having to sell your home and move elsewhere.
Equity is the current value of your property minus any mortgage or loans secured against it.
Equity release is only available to homeowners over the age of 55 that own their own home valued at least £70,000.
The amount that you can release is dependant of your age and house value.
You don’t have to make any monthly repayments if you do not want to, and equity release plans have no set term. The plan is repaid usually when you, or the last remaining borrower, either passes away or moves into long-term residential care.
What you can use Equity Release for?
Equity release has become a popular way to boost finances in retirement as the tax-free cash you release can, typically, be spent on pretty much anything you want.
Whether it’s to clear existing debts or help out family. Others use it to fund the things they’ve always wanted and now have the time to do – such as a holiday of a lifetime or a brand new car.
You should always think carefully before securing a loan against your home.
How Equity Release works?
There are typically two types of equity release – lifetime mortgages and home reversion.
A lifetime mortgage, which is the most common form of equity release, is effectively a loan secured against your home. It allows homeowners over 55 to access some of the cash/equity tied up in the value of their property, while still retaining 100% ownership.
Interest rates are usually fixed on these loans, although variable rates are available. There are typically no monthly repayments, unless you choose a plan that allows repayments of interest or ad-hoc repayments.
By speaking to one of our Equity Release specialists, they can recommend a plan to suit your situation. Whether it be taking the money in a lump sum or in instalments after an initial withdrawal, inheritance tax planning, or making ad hoc capital repayments to reduce the build up of interest on your plan.
Home reversion plan
A home reversion plan is the alternative to equity release, but is only available to people who are at least 65 or over. A home reversion involves you selling all or part of your property to a reversion company in return for a tax-free release. You will receive less than the market value of your home and the amount you will receive will depend on your age, property value and the proportion you wish to sell. You can live in your home rent free for as long as you wish – however you will no longer be the legal owner.
There are no monthly repayments to make and no interest to pay. When your home is sold at the end of the plan, the provider will take their share of the proceeds; the remainder is left to your estate, providing you did not sell 100% of your property.
With a home reversion plan, you can only receive your money in one lump sum.
Speak to one of our expert equity release advisers to find out which type of plan suits you best.
Are you protected?
Equity release is authorised and regulated by the Financial Conduct Authority (FCA). This is the UK’s financial regulatory body whose aim is to ensure protection for consumers, enhance market integrity and promote effective competition.
In addition, you are also covered through the Equity Release Council (ERC), an industry body for the UK equity release sector, providing an extra layer of protection for the consumer. Equity release plans approved by them ensure:
A no negative equity guarantee – you can never owe more than the value of your home
The right to choose your own solicitor
The right to remain in your property for life or until you move into long-term care
The right to move home (subject to provider criteria)
All members of the ERC must adhere to the Council’s Statement of Principles, designed to promote high standards of conduct and practice
What are the advantages and disadvantages
Equity release isn’t the answer for everybody. To fully understand whether it’s right for you, it’s important you speak to one of our qualified equity release experts.
Our independent equity release specialists can review your circumstances and discuss any potential alternatives. After researching the whole market, your advisor will give you a personalised recommendation. If equity release isn’t right for you, they’ll tell you.
You can release an initial tax-free lump sum or, following an initial withdrawal, you can release more funds in stages
You can use the funds to pay off any existing mortgage or debts, therefore reducing your monthly outgoings
You don’t have to make any monthly payments if you choose not to, although with some plans you have the option to pay off some or all of the interest.
You can continue to live in your home for the rest of your life
You’ll never owe more than the value of your home
Equity release will reduce the value of your estate
It could affect your entitlement to means-tested benefits now or in the future
With a lifetime mortgage, the amount to be repaid can grow quickly because of the effect of compound interest
Equity release is designed to last for the rest of your life, so if you decide to pay it off early, you could have to pay an early repayment charge
How much can you release?
The amount that you can release depends on a variety of things: Your age, health and lifestyle, and your property’s value.
By using our free, no-obligation equity release calculator, you can quickly see how much you could release.
The results provided will show us which plans you may be eligible for from across the whole market, the amount you could release with different providers, their current interest rate, and any benefits that come with the plan.
Although you can take out equity release if you still have a mortgage or any outstanding secured loans on the property, you must repay them, and the cash you release can be used to do this, any money left over belongs to you.
What happens next?
Releasing cash from your home doesn’t have to be complicated
Step 1: See how much equity you could release
Get a free, no obligation quote to see how much you could release from your home. It compares the whole market to find an equity release plan that could suit you.
Step 2: Advice and recommendation
You will need to book an initial consultation with one of our independent equity release specialist at a time that suits you, this can be done over the phone. Following this, if you decide to proceed, your adviser will look at all the products available on the market and provide you with a personalised product recommendation and suitability report based on your circumstances.
Step 3: Application
Once you’re satisfied the plan suits all your requirements, your adviser will complete and submit an application form and deal with all the corresponding documentation needed. Your home will then undergo an independent, professional valuation at a time suitable to you. The lender will then provide you with an offer based on this valuation.
Step 4: Completion
Once you accept the offer, your solicitor conducts all legal paperwork and it should take approximately 6 to 10 weeks from application to completion (although it some cases, it could take longer). You’re then free to enjoy your relaxed tax-free retirement.
Ready to take the next step or need more information? Call Relaxed Retirement to arrange a free, no-obligation initial appointment on 0800 062 2563 (lines open 9am-8pm Monday-Thursday, 9am-5.30pm Friday. Alternatively, download our free equity release guide.
Get in touch with our expert team today for a no obligation chat.
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