Should you consider equity release?

Equity release enables you to access the equity (money) tied up in your abode if you are 55 or older. You can have a lump sum, smaller amounts or a combination.
Equity release can be more expensive than a normal mortgage.

Whilst moving is possible, if you decide to downsize later, you’ll need adequate equity in your home.

There are two options: lifetime mortgage and home reversion.

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Lifetime mortgage

You choose a mortgage secured on your house or flat whilst keeping ownership. You can repay interest only, capital and interest, or allow the interest to roll up, where unpaid interest gets added to the loan (this means debt can accrue quickly). The loan and any accumulated interest are paid back on your death or when you go into care.

You can usually borrow up to 60% of your property’s value.

Interest rates must be fixed or capped.

Monthly payments could be based on income.

There is no fixed term or date for repayment of the loan.

Home reversion

You sell some or all of your abode in exchange for a lump sum or for regular payments. You can inhabit the property until your death – maintaining and insuring it – and can ring-fence a proportion of your property for inheritance use. The percentage you keep always stays the same unless you choose to release more cash. Eventually your property gets sold and the proceeds are divided according to ownership proportions. You usually get 20% to 60% of market value. The amount grows according to how old you are when you take out the plan.

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No negative equity guarantee

When your property sells, and solicitors’ and agents’ fees are paid, even if the percentage remaining is not sufficient to repay your provider the outstanding loan, you and your estate will not be liable to pay anything else.

Staying vs moving

You can stay in your property until you need long-term care or die. You can move provided the new house or flat is acceptable to your provider.

Employ an independent financial adviser

Software for financial advisers can streamline advisers’ administration. Today, Software for IFAs is widely available.

Ask an independent financial adviser for advice – make sure your adviser is on the Financial Conduct Authority register and the Equity Release Council member directory.


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