We are able to help our clients consider their options around Equity Release.
Equity release will reduce the value of your estate and can affect your eligibility to means tested benefits.
We all look forward to the day when we can stop or cut down on the amount of time we spend at work and all of the things we’d like to do once we’ve retired.
If you’re facing a pension shortfall or need to meet an unexpected expense, equity release may be an option to consider. It allows you to unlock some of the wealth you’ve accumulated in your property without having to move. But before you consider taking this option, there are key aspects of it that you need to know.
The equity or value you have within your home is its open market value less any mortgage or other debt held against it. You are more likely to be able to make use of an equity release scheme if you have no current mortgage, or if any mortgage you have is relatively small.
Taking out equity release is an important decision, so it’s vital that you have obtained as much information as possible to be in a position to make an informed choice. At Mortgage Options, we can help you look at your options and establish whether equity release could be right for you.
There are two main types of equity release scheme:
- Lifetime mortgage – a loan secured on your home, which is repaid by selling your home when you die or go into long-term care
- Home reversion – you sell all or part of your home to a scheme provider in return for regular income or a cash lump sum, or both, and continue to live in your home for as long as you wish
Why homeowners are releasing equity in record numbers:
As an alternative to downsizing
Many simply don’t want to sell the family home, with the emotional attachment, comfortable living, a settled environment and established local network. Furthermore, poor selling conditions and a lack of supply of property to move make this simply unappealing, if not impossible. Lastly, the cost and hassle factor are enormous. All of these can be overcome via equity release.
Gifting an early inheritance
It’s not news that it’s very challenging for young people to get their first step on the property ladder, nor that private schooling remains very popular. Equity release enables funds to be released for both a deposit for children’s property, or for grandchildren’s school fees. Whether it’s for these reasons or just for Inheritance Tax purposes, the seven years starts now. Furthermore, you may wish to spend money now enhancing your property and having time to enjoy it.
Funding a more comfortable lifestyle
Many find their wealth tied up in the equity in their property. Unless through a dramatic downsizing operation, this can create a sense of being asset rich but cash poor. Whilst releasing funds from your property will potentially reduce the size of a beneficiary’s inheritance, most beneficiaries would wish their family to enjoy a prosperous retirement.
Replacing a mortgage
Replacing an old residential mortgage with an equity release mortgage can extend the term beyond the traditional limits of age 65–70. Furthermore, it provides a solution to interest-only loans that cannot be repaid.
Buying a second home
Whether it’s moving into a city flat for a more cosmopolitan lifestyle, a country or seaside retreat, or simply to escape the UK winter climate, many release funds tied up in their main residence to expand their horizons in retirement.
Releasing equity from your home is a lifetime commitment, so it’s worth including your family in any decision you make.