Equity Release
Equity release allows homeowners over 55 to unlock cash from their property without needing to move. It can be a solution for those with a valuable home but limited income. With options like lifetime mortgages and home reversion plans, you retain the right to stay in your home until death or long-term care needs. However, equity release can impact inheritance and may come with risks and fees. Always seek professional guidance and consider reputable providers to ensure this option aligns with your financial goals.
Unlock Property Value with Equity Release
A Flexible Option for Homeowners Over 55
What is equity release and who is suitable for?
Equity release is an option for homeowners over the age of 55 to unlock some of the value tied up in their home.
Equity release is a way of releasing money from the value of your home without having to move out or pay it back during your lifetime.
If you are cash-poor but asset-rich – i.e. you have a low income but your home is valuable – then it could be a good way of getting your hands on some of that cash without having to downsize.
Will I still own my home or could I lose it?
If you take out a lifetime mortgage, you will continue to own your home.
If you go for a home reversion plan, you will have to give up the deeds and the equity release scheme provider will own all or part of your home. But you will still own a lifetime lease.
In both cases, you’ll be allowed to stay in your home until you either die or go into long-term care.
However, if you breach the contract – by letting your home fall into disrepair, for example – technically, you could be forced to leave.
What are the downsides to equity release?
When you die or move into long-term care, the equity release scheme provider will sell all or part of your home and keep the money. So that money won’t go to your loved ones after you die. And, once you’ve built up a substantial debt, you may not be able to move to a different home while you’re still alive.
Remember that you can only spend the money once. If you’re in your 60s and thinking of using equity release to fund a lavish lifestyle, the money could run out by the time you need to pay for care homes and other support.
There are reputable equity release providers (Equity Release Council members) but watch out for those who aren’t. There’s more than one way that dishonest providers can take advantage of your situation:
- Misleading you into buying expensive equity release products that are not suitable to your situation or not being upfront with you about the implications of a deal.
- Giving an unreasonably low valuation for your property, meaning that you get less money out of the deal.
- Selling your house to a third party that goes bust, meaning you could lose your home.
What happens if I enter into an equity release plan and then decide to move?
With a lifetime mortgage, if you have built up a substantial debt, you may not have money available to buy a new home. So, effectively, you could be stuck where you are until you die.
With a home reversion plan you can normally select a home which meets your requirements and the provider’s criteria. It will normally need to be less than the value of the property you are occupying. And you will be responsible for the selling costs as well as the provider’s legal fees.
What are the legal safety nets put in place to protect equity release customers?
You have a legal right to buy back your home at any time. But this can be very complicated so seek professional advice. It can also be expensive to do so – as well as paying off whatever interest you’ve built up, early repayment charges can sometimes be as high as 25%.
Make sure your provider is part of the Equity Release Council (see below), because these schemes have to provide a “negative equity guarantee”. This means that if the value of the property falls below the amount you owe, the provider will take a loss, and it will not be passed on to your family.
Also, if you and your partner are both eligible by age, you can take out a joint equity release plan, which means your partner will be able to stay in the property for the rest of his or her life.
Who are the biggest and most reputable providers?
To find out whether your equity release provider is trustworthy you should make sure they are a member of the Equity Release Council (ERC) and follow the Equity Release Council’s code of conduct. Among other criteria, council members have to promise to make the best interests of their clients paramount and to treat customers fairly in all their actions.
Some of the better known members of the ERC are Legal& General, Aviva, Retirement Plus, Bridgewater, Just Retirement, LV=, More 2 Life and Stonehaven.
How much do equity release schemes cost?
You will have to pay application and valuation fees. Application fees can vary from £500 to £700 and valuation fees depend on the value of your house.
Interest rates vary from 5-7% & upward. If you’re paying 7%, the debt will double every ten years, so it’s worth shopping around for the cheapest option and we can do that!
Do I qualify for equity release?
You have to be over 55 for lifetime mortgages and over 65 for home reversion schemes.
You have to be the owner of your home.
And you’re more likely to be eligible if you have no current mortgage, or, if any mortgage you do have, is relatively small.