How can my property provide for me?
For many people, their property is their biggest asset. Unlocking this value via equity release is an option being considered by an increasing number of over 55s as a way to help financially plan for retirement. Equity can be released via a lump sum or in stages via drawdown to help provide an additional source of funds or income in later life, with a growing choice of product features and flexibilities.
What is Equity Release?
Equity release is the umbrella name for products that provide consumers with a way of releasing the wealth tied up in their property without having to sell it and move to another home. Today we are looking at a flourishing sector which has served over 400,000 consumers, loaned more than £20bn since 1991 and enjoys exceptional customer satisfaction rates.
Are there different types of Equity Release?
There are two main types of equity release products.
You can either borrow against the value of your home (known as a Lifetime Mortgage) very much like a standard residential mortgage. You retain full ownership of your home and any interest on the loan can be paid as you go along or rolled up with nothing to pay until the end. The loan and any interest outstanding are then repaid by your estate
when you either die or move to permanent long-term care (or in the case of a couple the last person living in the home).
The other option is to sell all or part of your home in exchange for a lump sum or a regular monthly income (known as a Home Reversion Plan) while retaining the right to remain in it, typically rent free. You will know precisely what portion of your property you have parted with and, equally, what has been ring-fenced for later use if that is what you have decided to do, possibly to leave in a Will. The percentage you retain will always remain the same regardless
of the change in property values, unless you decide to take further cash releases. At the end of the plan your property is sold, and the sale proceeds are shared according to the remaining proportions of ownership. Both Lifetime Mortgages and Home Reversion Plans types are regulated by the Financial Conduct Authority (FCA).
Equity release will reduce the value of your estate and can affect your eligibility for means tested benefits.