How Does Equity Release Work?
BY Responsible Life Partnership
1st Jan 2015 Property
4 min read
For the UK’s over-55 homeowners, your property is most likely your most valuable asset. With house prices having risen over the past few decades, the ability to access that property wealth could make a big difference to your lifestyle. Reader’s Digest’s equity release partners can explain how equity release works...
If you are looking to access some of the wealth locked within the value of your home then knowing what to expect can make the journey smoother and your decisions easier.
The Basics – What is Equity Release?
First, what is equity?
Equity is the difference between your home’s market value and any remaining loans or debts secured on the property such as a mortgage. A simple example is a house worth £200k with a £50k mortgage still to pay on it; this would leave £150k of equity in your home.
Equity release is a financial tool which allows you to access your home’s equity, tax free. There are different plans available depending on the way that you want to access your home’s equity; either with a Lifetime Mortgage or by selling part of your home with a Home Reversion Plan.
Reader’s Digest Equity Release will only advise on Lifetime Mortgages, as only with a Lifetime Mortgage will you remain the sole owner of your home.
How much can I release?
Calculating how much equity you can release is based on your age, your home’s value and the interest rates available at the time. Generally, the older you are and the more valuable your home, the more equity you can release.
The amount you release plus, any interest added over time, is recovered from the sale of your home once you have passed away or gone into full time residential care. There are methods and options to keep the interest down and even to guarantee an inheritance for your loved ones. To find out more about what could be available to you, fill out our equity release calculator and a member of our Information Team will be in touch.
Who is eligible for Equity Release?
To be eligible the youngest person on the deeds needs to be aged 55 or over and you need to live in the property that you wish to release equity from. The type of property you own can also be a factor, but our equity release specialists can help you to determine whether your home is suitable.
The Process:
The equity release process will typically take this route:
- First a free, initial, no-obligation telephone conversation with our equity release partner can determine your eligibility to release equity. You will learn of how equity release could fulfil your needs and how much you could potentially release.
- If you are eligible and interested then a free, initial appointment with a fully qualified equity release adviser can be arranged. This adviser will be local to your area so best placed to understand your home and your needs.
- During this appointment, the finer details will be broken down into clear, understandable segments of information and applied to your unique situation. Releasing equity from your home will reduce the value of your estate and may effect your entitlement to any means-tested benefits that you may be entitled to. However, an adviser will be able to explain this to you and look into the effects of equity release on any benefits you are receiving as part of the service. All alternatives will be explored with no pressure to proceed.
- A set of recommendations will be presented to you based on the best match to your needs and you will be advised if equity release is not right for you. You will be informed that as you are looking to use money from your home to fit your current needs, this will naturally mean there is less for your heirs to inherit later. You can then make a decision based on all the facts.
- A second, free appointment to answer further questions is then available upon request. You will know at this stage if equity release is the right path for you, and your appointed adviser will make an application with you if you choose to progress further. There is still no obligation to proceed at this stage.
- Following this, your property will be independently valued, and an offer made on how much you can release from it which will all be clearly explained. Remember, you will remain the owner of your home with a Lifetime Mortgage.
- Once the offer is explained and accepted you are required to seek legal advice from a solicitor who will arrange all of the legal details. Reader’s Digest’s equity release specialists can put you in touch with solicitors experienced in equity release who can make the process simpler and quicker.
- The process is completed and after a short time – usually 4-6 weeks from application – you will receive your released funds. The equity release company only collect their fee once the case has completed, so if you cancel before this stage there will be no advice fee to pay.
How do I make the first step?
The first steps with equity release are simple. An online equity release calculator, such as the one above, will give you the first idea of how much you could release. Once you have entered your details an informative equity release guide will be made available to you, by email or by post, which will give you more information as to how equity release could work for you.
Alternatively, you can freephone 0808 231 1968 to speak to a member of our Information Team who can answer any questions that you might have, provide a better estimate of the amount you could release and, if you are ready, book you an appointment with your local equity release adviser.
A Lifetime Mortgage may impact the value of your estate and could affect your entitlement to means-tested benefits. Think carefully before securing other debts against your home. 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.
Keep up with the top stories from Reader’s Digest by subscribing to our weekly newsletter.
