Many UK residents may benefit from releasing equity from their home. If you are currently weighing up the possibility of releasing equity from your home, check out these 10 facts you simply have to know about equity release.
Equity Release is Regulated
The Financial Conduct Authority regulates every equity release lender. Additionally, the Equity Release Council represents hundreds of equity release professionals to ensure all applicants receive the best advice and service.
You Could Still Own Your Home
Just like re-mortgaging your home, you could still own your property with a lifetime mortgage. This is a popular plan in the market which allows you to still live in your property for life depending on the terms.
The Cash is Tax-Free
The equity released from your property is completely tax-free, meaning the whole lump sum goes straight into your pocket. This means you can spend the money as you please.
There is a Minimum Age
Equity release is traditionally aimed at pension-age homeowners. Many equity release lenders insist upon all applicants being aged 60+, but Age Partnership have access to plans for everyone aged 55 and above.
There is a Minimum Home Value
The vast majority of lenders will not consider properties which have a market value of less than £70,000.
The Upper Limit
The amount you can release from your home is based entirely upon your age, health and the value of the property. On a Lifetime mortgage, you could potentially borrow up to 55% of your property value, if your circumstances fit the lenders criteria which may take into account health and lifestyle factors.
Lenders May Take Your Health and Lifestyle into Account
When lenders are considering the amount of equity which can be released from a property, they may take the applicants’ health and lifestyle into account. Lifestyle choices such as drinking alcohol and smoking could allow you to release even more money from your property. Likewise, conditions such as diabetes and high blood pressure could entitle applicants to an enhanced amount equity release.
Pay Off your Mortgage
One of the requirements of releasing equity is paying off any outstanding mortgage. If you are able to release more money than the outstanding balance and once the mortgage has been paid, you can spend the remaining cash as you wish.
Interest Rates Are Fixed
There are a variety of options available with a lifetime mortgage, with many plans offering interest rates that are fixed for life. You can choose to make monthly repayments to prevent the interest accumulating*, allow the interest to roll up and be repaid from the eventual sale of your property or even have a flexible repayment option, which allows you to make ad-hoc payments during the course of a year.
The Debt Won’t Be Passed On
If the worst should happen and you owe more than your property is worth, most plans offer a No Negative Equity Guarantee, meaning you cannot leave a debt to your estate.
Equity release may involve a lifetime mortgage or reversion plan. To understand the features and risks, ask for a personalised illustration.
Releasing equity from your home is not suitable for all home owners and situations. If you are interested in releasing equity you should seek independent, impartial advice to ensure that it is the best option for them. Award-winning Age Partnership could help you. If you are interested in releasing equity, please contact the Age Partnership team on 08080 555 222 and they will discuss all the options, including what impact it could have on the size of your estate over time and if your entitlement to current and future means-tested benefits may be affected.
*Your home may be repossessed if you do not keep up with repayments on your mortgage.