Equity release is a form of borrowing which allows homeowners usually over the age of 55 as a minimum, to release the equity from their home as either a tax free lump or as an income. It is also possible to take several smaller lump sums over several years.
Most policies do not repay the interest or capital of the borrowed amount until some qualifying events, which is often for your lifetime or until you enter care.
As there are typically no repayments of either the capital or interest, this means the debt can increase quickly.
It is worth pointing out that for products that meet the Equity Release Council’s standards, they are required to feature a ‘no negative equity guarantee’, which means the debt you must repay will never exceed the value of your home.
Their s no prescribed use for the proceeds of equity release and it is often used for the following reasons:
Equity Release historically had a bad reputation as borrowers were not awarded the protection they are afforded by the Equity Release Council (ERC).
As the capital and/or interest is not typically repaid from the amount you borrow, the debt can increase.
Prior to the ERC and the ‘no negative equity guarantee’, it was possible for the initial equity that was released increase over the value of the home.
Equity Release can be suitable for the following people:
Equity Release can often be suitable for those who wish to unlock equity in their home for a specific purpose, but have no way of funding it such as savings, pension income and do not wish to sell the property.
Alex and George both have the specialist qualifications in Equity Release and can work with you to answer if it is right for you.
We will always put your best interests first, which may even mean recommending doing nothing.
If equity release is right for you, this can be a complicated decision. If you are interested in equity release, contact one of our independent equity release advisers.
Lifetime Mortgages
This involves taking out a mortgage on your property, yet you still retain ownership of your property.
You can either ‘protect’ some of the value of the property or none at all. You also have the option to make repayments to either the capital or the interest, or let the interest ‘roll up’.
The accrued interest and initial loan amount is repaid when you die or if you move into long term care.
Home Reversion
With home reversion, you sell either all or a percentage of your home in return for either a lump sum, regular income or a combination of the two.
You usually get between 30%-60% of the current market value of the property and the older you are, the higher the percentage of the current market value you will receive.
You reserve the right to continue to live in the property under a lifetime lease.
Heritage Financial Planning is a trading name of 2plan wealth management ltd which is authorised and regulated by the Financial Conduct Authority (FCA). It is entered on the FCA register (www.fca.org.uk) under reference 461598.
Registered office: 2plan wealth management Ltd, 3rd floor, Bridgewater place, Water Lane, Leeds, LS11 5BZ. Registered in England and Wales. Number: 05998270
