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What Equity Release is.
Why you might be considering Releasing some of your Equity.
How you can achieve this.
What is Equity?
Equity is the difference between the value of your property and the current outstanding loan.
Example:
- £100,000 – Value
- £ 25,000 – Current outstanding loan
- £ 75,000 – Equity (Equity Release will allow you to release a percentage of the equity left in your property).
How much Equity you can Release will depend on your own personal circumstances, for example, the value of your property and your age are two of the main things that will be considered. One of our experienced Qualified Equity Release Advisers will provide you with all the information you will need to make an informed decision.
What is Equity Release?
Equity Release in when you want to Release some of the Equity in your home and have the cash paid into your bank account.
Why would you want to Release some of your Equity?
Your Interest Only Mortgage is coming to an end and the lender wants their money back.
You are thinking about making some overdue home improvements or essential alterations, to make your property more comfortable.
You would like a little more funds to enjoy your life or just to make you that bit more comfortable financially.
You want to help a family member with a financial gift sooner rather than later.
You want that trip of a lifetime, while you can.
You would like a newer vehicle to make your journeys more pleasurable.
You would like or need to pay someone to help you at home, so you can stay in your home.
You may want to move home but don’t think it’s possible as you are not sure if you would qualify for a mortgage at your age.
You want or need to buy out someone as part of a separation.
How can you release some Equity in your residential property?
You can release the Equity in your home in a number of ways:
- You might want to consider Downsizing
- You could remortgage using a Standard Mortgage
- You could remortgage using a Lifetime Mortgage
- You could look at a Home Reversion Plan
What is downsizing?
Downsizing is when you sell your residential property to purchase a smaller or lower valued property as your new residential property.
If you sell your residential property you get to keep the equity, which is a Tax-Free Lump Sum paid direct into your bank account, minus any secured loans that have got to be repaid and all the related buying & selling costs.
Downsizing would provide the maximum amount of equity and also have the added benefit of not incurring any interest payments.
What is a standard mortgage?
A Standard Mortgage is what you probably used to buy your house, i.e. A Mortgage, which is a secured loan taken over a number of years where you make (Capital & Interest) monthly payments to repay the loan.
Releasing Equity can be achieved through a Standard Mortgage. If your property has sufficient equity, you could possibly remortgage for more than the current outstanding loan to release some additional funds, from the available equity in your property, subject to the usual affordability assessments.
What is a Lifetime mortgage?
A lifetime Mortgage is very similar to a standard mortgage, although there are different rules and criteria to consider. As the name (Lifetime Mortgage) suggests, there is no fixed end date, so there is no pressure to repay the loan within a certain time frame.
The loan is repaid when Downsizing as described above, or the last remaining applicant dies or goes into long-term care and the property is sold.
You can Release Equity from your property using a Lifetime Mortgage, and there are usually no affordability assessments with a typical Lifetime Mortgage.
What is a Home Reversion Plan?
A Home Reversion Plan is when a property is sold to a third party and the occupants can live in the house rent free for the remaining years of their life, with no rent or monthly payments to make.
This option to Release some Equity can sound attractive; however, you would probably not receive the true open market value, and therefore, it is not recommended for the vast majority of people!
If family members are not aware that the house has been sold, then this is when it can be a really bad experience when family assets are not inherited as would under normal circumstances be expected!
Taking out a Home Reversion Plan is probably not the best option and is Not Recommended!
Is Equity Release Right for You?
Equity release can be a great solution for many homeowners, however it’s important to consider all the facts. While it allows you to unlock tax-free cash, it can reduce the value of your estate and affect inheritance plans. That’s why we recommend speaking to a Qualified Equity Release Adviser and discussing the implications with your family.
We have access to a UK Nationwide Network of Qualified & Experienced Equity Release Advisers, to answer your questions, explain your options, and help you make the right decision for your future.