As UK house prices continues to increase so too has homeowner confidence as a record number turn to equity release to fund their life plans. We look at the most frequently asked questions on equity release to help you better understand the increasingly popular retirement planning tool.
What is equity release?
Your equity is calculated as the difference between your property’s value and any outstanding debts or secured loans such as a mortgage. Equity release is an innovative financial tool that allows homeowners aged 55 or over to access some of their home’s value, tax-free, to spend as needed.
What types of equity release are there?
Generally there are three main ways to release equity from your home, namely a Lifetime Mortgage, downsizing, and a home reversion plan. Downsizing involves moving to a cheaper home and keeping the difference in value to spend as you need, whereas a home reversion plan involves selling a portion of your home to a provider, meaning you can continue to live there rent free, although you will not be the full owner.
What is a Lifetime Mortgage?
The most common way to release equity is with a Lifetime Mortgage, which involves releasing a tax-free sum from your home whilst remaining the full owner. There is no obligation to make payments with a Lifetime Mortgage, but there is the option to do so if you choose. There are a variety of features that might be available to you, including the option to create an interest-free reserve that can be accessed at a later date.
How does equity release work?
People use equity release for many reasons, including to pay off an existing mortgage, to renovate their home, to take a holiday, to gift to family, or to supplement an income. The Reader’s Digest Equity Release process involves receiving advice from one of our fully qualified specialists, who will discuss your needs and help you to find a suitable solution.
We have carefully selected a range of products that our advisers will compare for you. With flexible features prioritised throughout, we’ve designed this selection of products to offer great value for you and your family, both now and in the future. All products recommended will come from lenders who are members of the Equity Release Council. This will mean that they carry some inbuilt guarantees such as maintaining full ownership of your property, and never owing more than the value of your home.
Additionally, all initial advice is free so you can find out about your eligibility with no pressure to proceed further. The adviser you’re given will explore all of the alternatives to equity release to ensure this is the right route for you. They will also provide a personalised illustration, clearly outlining the effect that releasing equity could have on the value of your estate as well as any implications on any means-tested benefits you may be entitled to.
Will I face any problems with equity release?
Common concerns with equity release can include fears of repossession of the home or of the total amount repayable becoming more than the home’s value. This is not relevant with a Lifetime Mortgage however, as plans approved by the Equity Release Council have in-built safeguards to protect consumers specifically from this. As equity release involves increasing the money you have readily available, it is possible that your benefits could be affected, however, pensions and disability allowance are not affected. Your adviser will conduct a full benefits eligibility check and inform you if equity release will affect your entitlement.
How do I calculate how much equity I can release?
A specially designed equity release calculator like the one below will do all of the work for you and calculate how much you can release based on your age and your home’s value.
Whether you're curious as to how much you can release, or you want to take the initial steps towards releasing equity, our handy calculator will give you the information you require.
You can also contact us on 0800 029 1233 to discuss your needs with a view to arranging a no obligation appointment with one of our financial advisers.
A Lifetime Mortgage may impact the value of your estate and could affect your entitlement to means-tested benefits. To understand the features and risks ask for a personalised illustration. Reader's Digest Equity Release is a trading style of Responsible Life Limited. Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (https://register.fca.org.uk/) under reference 610205. Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,690. Our adviser will talk through the setting up costs of a Lifetime Mortgage before you make any decision to proceed.
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