Background to releasing the value in your home
Assuming you have paid (or almost paid) off your mortgage, the current market value of your home is yours. All you need do is tap into it.
There are various ways you can unlock some of the market value (or equity) in your property. For example you could downsize to a smaller property or one of lower value – perhaps by moving to a different part of the UK where house prices are cheaper.
Downsizing will give you maximum value from your home, but there may be disadvantages such as the hassle, disruption and cost of moving. You may also be very attached to the area where you currently live.Although the value of any inheritance you leave could be reduced, the money could help fund your retirement, or pay for whatever you want – a holiday, home improvements, a new car… it’s up to you.
Understanding Equity Release
If you feel that releasing equity from your property is right for you, there are two main types of scheme currently on the market. This section explains how each works, as well as their advantages and disadvantages.
Currently the most popular type of equity release plan is a lifetime mortgage. You borrow a set amount of money against the value of your home, which can be paid in the form of one lump sum. Some plans even allow you to take the money as and when you need it – which may help minimise the amount of interest owed.
You can then spend the money released however you wish. The best way to think of it is as a long-term loan, secured against the value of your property. The loan is paid off when your home is sold. In the meantime, you and your partner continue to live in your home with no interest to pay during your lifetimes. Instead, ‘compound interest’ is added or ‘rolled up’ with the loan. When the time comes, the debt is paid off using the proceeds from the sale of the property. This is usually when the last survivor dies or moves into permanent long-term care.
Lifetime mortgages are regulated by the Financial Services Authority (FSA).
> Typically available to those as young as 55.
> You keep ownership of your own home and can still benefit from any rise in house prices.
> You know how much money you will receive from the scheme at the start.
> There’s the possibility of leaving some equity to your heirs, depending on the size and length of your loan.
> Regulated by the FSA.
If the company is a member of SHIP you will benefit from a no negative equity guarantee.
> Your debt will grow over time, although with some plans this could be limited by releasing your money as and when you need it.
> The entire equity in your property may be exhausted, leaving nothing for your family.
> Your tax position and eligibility for means tested benefits may be affected, as might your options for moving or selling your home in the future.
Your home is safe, and you can live in it for as long as you like.
We believe specialist impartial advice is essential when considering equity release thats why we offer a free initial consultation with one of our experienced equity release advisers with no obligation to proceed any further. We will then leave you to discuss your plans with your family and make up your own mind.