If you own your own home and are over the age of 55 then it might be that you are already retired, or it is something that will be happening in the not-too-distant future. As we all know, planning, saving and pensions can only go so far and even the best prepared of us will likely have a tight budget to adhere to in our later years.
However, if you want to enjoy your retirement and have more financial freedom to enjoy yourself as you deserve to, then equity release could be the ideal solution.
What Is Equity Release?
Equity release is a type of mortgage product that allows homeowners to remain living in their property, whilst being able to unlock some of its value in the form of a tax-free cash release. These types of loans are secured against the home and typically require no monthly repayments, but instead the loan itself and the accrued interest is paid off from the sale of the property once you no longer need it after moving into long term care or passing away.
Types of Equity Release
There are two main types of equity release – home reversion plans and lifetime mortgages.
- Home Reversion Plans
This involves selling a portion of your home to a provider at below market value, in exchange for a tax-free lump sum. You can continue to live in the property, rent-free until you die or move into long term care and when it is sold, the proceeds are then split between the you and the lenders based on the percentages owned.
- Lifetime Mortgages
The most popular option for equity release, lifetime mortgages are where you borrow some of your home’s value at a capped or fixed interest rate. This can be taken all at once in a tax-free lump sum or alternatively in smaller chunks over time which is known as a drawdown. This option has the benefit of you only being charged interest on the money you have actually taken and not the cash you are yet to access. There are no repayments required but most allow you to do so if you wish to help repay the capital or the interest in order to reduce the overall cost.
Are You Eligible for Equity Release?
In order to be eligible for equity, the following will need to apply;
- You are over the age of 55 (both need to be over this age if applying as a couple)
- You own a property in the UK
- The property in question is your main residence
- The value of the home is over £70,000
Some of these eligibility requirements can vary depending on the type of plan and the lender.
Is Equity Release Right for You
Equity release can be the ideal financial solution for those wanting to make home improvements, take the holiday of a lifetime or simply enjoy a more comfortable retirement. However, it is not necessarily the right choice for everybody, and its suitability, benefits and advantages will likely depend on individual applicants and their unique circumstances including their age, income and how much they want to release.
Before you make such a big financial decision, it is always important that you seek out professional, impartial advice from an experienced and reliable equity release specialist. They will be able to provide the vital expert advice that you need to ensure that equity release is the right path for you and if not, they can suggest alternative solutions that may be better suited.
If you would like to discuss equity release or have any questions that have not been answered here, then please do not hesitate to get in touch and one of the friendly, knowledgeable advisors at Bower will be happy to help.
