Choosing the right Equity Release product for you isn’t as complicated as it seems, although it involves careful investigation and some important decisions.
Equity Release
Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration.
We will explain all the pros and cons of each option to help you make the best decision for your family.
Our fully qualified advisers with decades of experience will search the whole of market with access to all equity release lenders.
What is Equity Release?
Equity release allows you to release equity from your home without the need to move out. You can opt to pay nothing back until you home is sold, either after death or if moving into long-term care.
- You must be at least 55 years old (youngest of a couple)
- It may be possible to transfer an existing mortgage into some equity release schemes
- Your property is in the UK in a reasonable condition and over a certain value
- If you own a leasehold property the lease is expected to be 80 years or more in most cases
- The equity you release is tax-free
Equity by definition is the value of your home on the open market (less your outstanding mortgage or other debt held against it).
Types of Equity Release
There are two schemes available: Lifetime Mortgage and Home Reversion Plan. There are many options available to both schemes which our qualified advisers can help you with.
Lifetime Mortgage
- The youngest member of the homeowners must be at least 55
- This is a loan secured against your home
- You retain full ownership of your home
- You make a monthly payment to repay either: Nothing, Interest Only, Part Interest
- Any outstanding amount will be repaid from the sale of your home in the event of death or moving into long-term care of the surviving partner
- You may need to pay arrangements, valuation and legal fees
Read more about lifetime mortgages here
Home Reversion Plan
- The youngest member of the homeowners must be at least 65
- You sell your home or part of it for a cash lump-sum
- You receive a lease giving you the right to live in your home rent-free (or paying a small amount)
- The reversion company will get its pay-out when the property is sold
- The age of the youngest borrower must be at least 60
Read more about home reversion here
What does it cost to setup?
In most cases, you will be required to pay fees and costs to set up an equity release scheme.
- Arrangement fee (not all schemes)
- Valuation fee (linked to the value of your property)
- Legal costs (please ask your solicitor for a full breakdown)
- Buildings insurance (this will need to meet the needs of your lender’s requirements)
- Possible rental charges (Home Reversion plans only)
How do you get your money?
Most schemes offer choices to suit your circumstances. Payments received are Tax-Free
- Cash Lump Sum
- Regular payments (called Draw Down or Flexible Facility)
- Combination of both: a lump sum at the beginning followed by regular payments.
Is Equity Release right for you?
There are advantages and disadvantages to Equity Release plans. We can help you decide whether equity release is right for you by providing a personalised illustration that explains the costs and risks involved.
- By taking an equity release plan could result with your family having little or nothing to inherit from your property when you die.
- Because the UK operates a means-tested benefits system having a lump sum may affect any entitlements such as pension credit, council tax benefit or support allowance.
- It can work out more expensive to use Equity Release than selling your house and moving to a less expensive property
- The process of Equity Release usually takes 8-12 weeks from application to funds being released
Considerations
Equity release schemes are not suitable for everyone. If you require money you should consider the following alternatives:
- Sell your current home and buy a smaller property.
- Other forms of borrowing, personal loan or traditional mortgage.
- Do you have any other investments, savings or assets?
- Claiming any state benefits you may be entitled to.
- Renting out a room.
- Asking family or friends to help.
At Bright Money Independent, our qualified equity release advisers will explore all of your circumstances to ensure that equity release is the right decision for you. If they don’t agree it is in your best interest they will advise alternative options.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
FAQs
for
Equity
Release
What is equity release?
Equity release is a way for homeowners to access some of the value tied up in their property without having to sell it or move out. It is typically available to older homeowners and allows them to release funds as a lump sum, smaller amounts over time, or a combination of both.
How does equity release work?
With equity release, you borrow against the value of your home while continuing to live in it. The loan is usually repaid when the property is sold, often after the homeowner dies or moves into long-term care.
What types of equity release are available?
The most common form of equity release is a lifetime mortgage. Home reversion plans also exist but are less common. Each option works differently and has its own advantages and considerations.
What is a lifetime mortgage?
A lifetime mortgage is a type of loan secured against your home. Interest is added to the loan over time, and repayment is usually made when the property is sold. Some lifetime mortgages allow voluntary repayments to control the balance.
Who is eligible for equity release?
Eligibility typically depends on age, property value, and property type. Most equity release plans are available to homeowners aged 55 or over, although criteria varies by provider.
Do I still own my home with equity release?
Yes. With a lifetime mortgage, you retain ownership of your property. The lender has a charge over the property, but you remain the legal owner.
Is equity release regulated?
Yes. Equity release is regulated by the Financial Conduct Authority. Most providers also follow standards set by the Equity Release Council, which offers additional consumer protections.
Will equity release affect my inheritance?
Equity release can reduce the value of your estate, as the loan and interest are repaid from the sale of your home. Some plans offer inheritance protection options, but this may limit how much you can borrow.
Can I move home after taking equity release?
In many cases, yes. Most lifetime mortgages are portable, meaning you can transfer the loan to a new property, subject to lender approval and property suitability.
Does equity release affect benefits or tax?
Releasing equity can affect entitlement to certain means-tested benefits. It may also have tax implications depending on how the funds are used. Independent advice is important.
Can I repay an equity release plan early?
Some equity release plans allow early repayment, but early repayment charges may apply. These charges vary by provider and plan type.
Is equity release right for everyone?
Not always. Equity release can be a useful option for some homeowners, but alternatives such as downsizing or other borrowing options should also be considered.
