4 little-known truths about equity release
While equity release is a financial solution used by thousands of homeowners aged 55 and over to help them live a better future, it can still seem like a bit of a mystery.
There are lots of different plans and products available so it may feel daunting to start exploring it as an option, however it doesn’t have to be. Here we help you discover 4 little-known truths about equity release.
Truth number 1: You can leave an inheritance to your loved ones
Equity release may involve either a home reversion plan or a lifetime mortgage, which is secured against your property and will reduce the value of your estate and impact funding long-term care.
As the value of your estate is reduced, you may think you won’t be able to leave an inheritance.
However, equity release plans allow you to ringfence a portion of your homes value so you can pass part of it down as an inheritance to loved ones, allowing them to benefit from some of the value built up in your
estate in the future, whilst you benefit from some of it now.
Truth number 2 – You won’t owe more than your home is worth
With equity release, any money released plus accrued interest doesn’t need to be repaid until you pass away or move into long-term care, and at that point the sale of your property is likely to be
enough to pay off the remainder of your loan.
There is always a possibility that you could end up owing more than your home is worth if house prices fall, and you could be concerned it will be your loved ones’ responsibility to pay this difference.
The no negative equity guarantee ensures this is not the case.
All equity release plans covered by the Equity Release Council come with this guarantee, meaning your estate will never owe more
than your property is worth when it is sold.
Truth number 3 – You don’t have to be retired to release equity
Equity release is popular among retirees for several reasons, including supplementing an income to maintain the lifestyle you were used to if you do not have substantial savings or a pension to rely on.
But that doesn’t mean you have to be retired and it could be a solution for anyone aged 55 and over regardless of if you’re still in full time work or not.
The reasons for releasing money, which you will discuss with your advisor, can be far and wide.
You could use the money to enjoy luxury holidays, a new car or gifting to loved ones. According to equity release broker Age Partnership the most popular reason for releasing equity in 2023
was to make home improvements.
As long as any existing mortgage is first repaid, which is a condition of equity release, the money is yours to enjoy.
Truth number 4 – You can continue to own your home with a lifetime mortgage and move in the future
The most popular type of plan by far is a lifetime mortgage, which allows you to maintain 100% ownership of the home you love.
With a home reversion plan this is slightly different, as you sell all
or part of your home in return for releasing the money in your home.
You can also move home with your equity release plan as long as your new property meets the requirements of your equity release provider, which your advisor will help you find out.
This feature must be included by all plans which meet the Equity Release Council product standards.
Important things to consider: Advice is required before proceeding with equity release to help you find the most suitable plan for
your individual circumstances.
Through Age Partnership, initial advice is provided for free and without obligation.
Only if your case is completed would an advice fee of £1,895 be payable. Other lender and solicitor fees may apply.
Age Partnership is a trading name of Age Partnership Limited, which is authorised and regulated by the Financial Conduct Authority.
FCA registered number 425432. Company registered in England and
Wales No. 5265969. VAT registration number 162 9355 92. Registered address, 2200 Century Way, Thorpe Park, Leeds, LS15 8ZB.