What is Equity Release and Why Should You Consider it?

by | Oct 26, 2020 | Blog, Uncategorised

Equity release is the process of taking cash out from the value of your home, without having to move. It can be done if you’re aged 55, or over. Equity release is a long-term loan that is paid off using your home once you pass away, or need to go into care. Until then, you can stay and won’t need to move out. Below we will go into equity release more, and explain why you should consider it. 

Unlock money from your home for a more comfortable retirement.

How does equity release work?

For those aged 55 and over, an array of home finance options become available. There are typically two types of ‘later life’ borrowers- those who would like to re-mortgage existing borrowing so that they can pay their mortgage off before they want to retire, and those who want to borrow into retirement.

What equity release enables, is the chance to access some of the equity tied up in your home through a Lifetime Mortgage. A few options are available with these products: either you make no payments, interest repayments or ad hoc lump sum repayments. Any remainder balance is then repaid when the borrower dies, or goes into care. With equity release, there are also safeguards in place, such as no negative equity guarantee and a requirement for independent legal advice.

Equity release may involve a Lifetime Mortgage or reversion plan: this is a loan secured against your home, reducing the value of your estate. This may then affect your entitlement to means tested benefits. Before you secure a loan against your home, you should always think carefully as it isn’t for everyone.

Why consider equity release?

Equity release usually helps those aged over 55 to help manage their finances in later life. Other reasons include: 

  1. Pay off an existing mortgage 

Equity release can be used to clear an existing mortgage and help to fund retirement. House prices have substantially increased over the last 20 years, therefore many homeowners have built significant equity. By choosing equity release, they are freeing themselves of the burden of  monthly repayments so their retirement income is boosted. It also provides homeowners with a tax-free sum to spend whilst they enjoy their retirement.

2. Boost disposable income 

Many are concerned about having a ‘cash cushion’ for later life, especially if some haven’t paid enough into private pensions in order to boost their state pension. Equity release provides them with a tax-free lump sum which can give breathing space, or provide a long-term top-up to retirement income or care costs.

3. Home and garden improvements 

Unlocking property wealth provides those who need it, with a lump sum in order for them to improve their home. Having a Lifetime Mortgage guarantees that you will stay in that home for life, therefore improving it for a better quality of life is a very valid reason to get equity release.

4. Holidays and large purchases 

Whether you want to tick that cruise off your bucket list, or escape the British winter, having a lump sum to spend on this, as well as hobbies and city breaks can really give some people something to look forward to. Or it can also be used to fund single purchases, for example, that car that you’ve always dreamt about.

5. Inheritance gifts and planning 

Planning ahead is another reason for equity release. Rather than having their capital tied up in their home, which is subject to inheritance tax, they could pass a large part of its value as a gift to loved ones with equity release. This can then be used for house deposits, or against student loans.

Interested in equity release? Here’s what to do next.

If you think that equity release is a viable option for you, then an Equity Release Specialist will be your next step. Claire Langan, of Mortgage Advice Bureau, will be able to search an array of products from a carefully selected group of leading providers. Claire will then find a provider who is most suited to your requirements and needs.

Anyone who is contemplating equity release, should always seek specialist advice. There are so many options out there, by different providers. Whether you are after taking a lump sum out immediately, or being able to take ‘withdrawals’ out over a certain time frame, Claire can help you to find the best equity release for your needs.

If you are unsure about equity release, Claire will be able to talk things through thoroughly with you. Unless you decide to go ahead, the service is free of charge. If you decide to go ahead, then there is an advice fee.

For a completely FREE, no-obligation consultation, you can phone Claire on 01202 859500 or 07799626429.

Alternatively, you can email Claire at claire.langan@mablaterlife.com