How do equity release schemes work?

Equity release schemes allow you to unlock the value of your home and turn it into cash. The two main types are lifetime mortgages and home reversion plans. With a lifetime mortgage, you borrow against your home’s value, and the loan plus interest is repaid when you die or move into long-term care. With a home reversion plan, you sell a part or all of your home in exchange for a lump sum or regular payments but continue to live in the property rent-free.

How much does equity release cost?

The cost of equity release can vary depending on the interest rate, fees, and the type of plan. Costs can include arrangement fees, valuation fees, legal fees, and compound interest if you choose a roll-up plan. It’s important to compare different plans and understand all associated costs.

Which equity release plan is right for me?

The right equity release plan depends on your individual circumstances, including your financial needs, health, and property value. An adviser can help you compare different plans and find the one that best suits your situation.

Will I still own my home with equity release?

With a lifetime mortgage, you still own your home. The loan is secured against your property, and you continue to live there until you die or move into long-term care. With a home reversion plan, you sell part or all of your home but continue to live in it rent-free.

What happens to the equity release loan when I pass away or move into long-term care?

The loan is usually repaid from the sale of your home when you pass away or move into long-term care. Any remaining equity after the loan is repaid can go to your beneficiaries.

Should I seek independent legal advice?

Yes, it is highly recommended to seek independent legal advice before committing to an equity release plan. This ensures you fully understand the legal implications and terms of the agreement.

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What is Equity Release?

Equity release plans allow homeowners to unlock the value of their property and convert it into cash without having to sell their home. These plans are typically available to homeowners aged 55 and over and can provide a lump sum, regular income, or both. Equity release products are regulated by the Financial Conduct Authority (FCA), ensuring consumer protection and oversight.

Key Features and Benefits

Access to Funds: Release a lump sum, regular income, or both from the value of your home.
No Need to Move: Continue living in your home while accessing its value.
Flexible Options: Choose from different types of equity release schemes to suit your needs.
No Negative Equity Guarantee: Thanks to the standards set by the Equity Release Council (ERC), you will never owe more than the value of your home.
Interest-Only Payments or Roll-Up Options: Some plans allow you to make interest-only payments, while others add the interest to the loan balance (known as roll-up).

Factors to Consider

Eligibility

Equity release is usually available to homeowners aged 55 and over with a qualifying property. The amount you can release depends on factors like your age, the value of your home, and the type of equity release scheme you choose. Make sure your property meets the lender's criteria, which often include the type and location of the property.

Costs

Understanding the costs associated with equity release is crucial. These can include interest rates, arrangement fees, valuation fees, and legal costs. The interest on the amount you release can grow over time, especially with roll-up plans. Compare different plans to ensure you understand all the costs involved.

Impact on Inheritance

Releasing equity from your home will reduce the value of your estate, which means you might leave less to your loved ones. Some plans allow you to protect a portion of your property’s value to pass on as an inheritance. Discuss the impact on your estate with your family to ensure everyone understands the implications.

Impact on State Benefits

Taking out an equity release plan can affect your eligibility for means-tested state benefits. The additional income or savings may reduce the benefits you receive. It’s crucial to discuss this with an adviser to fully understand the implications.

Advice

Seeking professional advice is essential when considering equity release. An adviser can provide personalised recommendations based on your situation and goals. They can help you understand the pros and cons and find the best plan for you. Speaking to an adviser is crucial to ensure you are making an informed decision.

Next Steps

Choosing the right equity release plan can be complex, but getting expert advice can make it easier. By understanding your specific needs and circumstances, an adviser can help you find the best plan that provides access to your home’s equity.

Interested in the benefits of equity release? Speak to a knowledgeable adviser who can guide you through the process and help you make the right choice.

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Frequently Asked Questions

The amount you can get depends on your age, the value of your home, and the type of equity release plan you choose. Generally, older homeowners can release more equity. An adviser can help you determine the maximum amount available to you.

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