An insight into equity release for over-55s
Releasing equity could be a viable solution for enhancing your financial situation, enabling you to live the retirement life you've envisioned. Perhaps you're contemplating a once-in-a-lifetime holiday, or you have important home renovations in mind? Read on to learn more about how equity release works.
Did you know that a lifetime mortgage, the most popular equity release plan, lets you maintain full ownership of your home?
The funds you release are completely tax-free, and you choose how you'd like to access them, either as a one-off lump sum or as a series of smaller amounts over time.
What's more, some equity release plans don't require you to make regular repayments. So once you've cleared any existing mortgage, a prerequisite for equity release, you could potentially reduce your monthly outgoings.
How equity release works
When you pass away or move into long-term care, your property is sold. The loan, along with the accumulated interest, is then cleared, with any remaining funds going to your estate. As interest accrues over time, it can add up to a considerable portion of the property's value when sold, reducing the equity left behind. Some plans now allow the interest, or even a portion of the loan, to be repaid earlier to keep costs down.
Are you eligible?
If you're a homeowner aged 55 or over and your property is valued at over £70,000, you may qualify for equity release. Each lender has its own eligibility criteria based on your personal circumstances, so it's important to consult with an equity release specialist to confirm whether you qualify and how much you could potentially release.
The amount you can release depends on factors such as your age, your property's value, and your health and lifestyle. Some lenders offer medically enhanced plans for people with specific health conditions, which can open up additional options and rates.
The importance of professional advice
When considering equity release, it's vital to seek proper advice. A specialist broker can help you understand all the available options, including the potential implications on the size of your estate over time, given that equity release will reduce it. It can also impact your current and future entitlement to means-tested benefits. Equity release may involve a home reversion plan or lifetime mortgage, both of which are secured against your property and may reduce the value of your estate and affect funding for long-term care. It's worth asking for a personalised illustration to understand the features and risks.
Protecting your heirs
If equity release is on your radar, it's important to involve your family in the conversation, it will affect the inheritance you can leave behind. Some equity release plans allow you to earmark a portion of your property's future value to guarantee an inheritance for your family.
Most modern plans also include a no negative equity guarantee, meaning the total money borrowed against your property's value, plus any compounded interest, will never exceed the property's value. Any remaining shortfall is waived. So your estate will never be liable for more than what your property is worth when it's sold.
At DS Financial we offer both RIO mortgages and lifetime mortgages on a referral basis only via our trusted partners and their team of experienced equity release and later life lending advisers.
A lifetime mortgage is a long-term commitment which could accumulate interest and is secured against your home. Equity release is not right for everyone and may reduce the value of your estate.