Equity release won’t be right for everyone, but for homeowners aged 55 or over it can provide you with a tax efficient regular income, a cash lump sum, or a combination of the two. The “equity” in your home is the difference between its value and any debts secured against it, such as a mortgage. Equity release lets you access some of the money that is tied up in the property without you having to downsize or move home.
There are two forms of equity release:
- Lifetime mortgage – This is a debt secured against your property that accrues interest over time. You will have the option to pay all or some of the interest or to make no payments and allow the interest to accumulate. The lifetime mortgage will be repaid when you pass away or move into a care home.
- Home Reversion – This involves selling some of the value of your property to an equity release company for less than market value. There is no interest accrued but the growth on the share owned by the equity release company belongs to them when the property is sold.
There is a minimum age to take out equity release of 55 and there is no maximum age, although some providers do not increase the maximum loan to value after a certain age.
Equity release is suitable for most sorts of property including flats, houses and bungalows. It can also be possible to take out an equity release contract against a buy to let property. Each provider will have certain criteria that the property will need to meet for the equity release company to be happy to lend against it. It is therefore important to take independent advice on which provider is likely to consider lending against your property.
Equity release involves borrowing money against your property and it can affect your entitlement to state benefits and/or state funding for care costs. If you take out an equity release you will incur a debt and interest costs. Other more appropriate solutions may be available and professional advice is vital.
If you are considering whether equity release might be right for you, contact one of our qualified advisers for a free initial consultation. To arrange a no obligation appointment, contact us today by telephone on 01626 242500 or email enquiries@wbwcfp.co.uk.
