How Does Equity Release Work?
If you are looking to access some of the wealth locked within the value of your property, as over 19,000 home owners did last year, then knowing what to expect can make the journey smoother and 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 the property.
Equity release is a financial tool which allows you to access your property equity tax free. There are different plans available and some, such as a Lifetime Mortgage, ensure that you remain the owner of your home so no need to move or sell your property.
How much can I release?
Calculating how much equity you can release is based on your age, your property’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 is recovered from the sale of your property once you pass away or go into full time care and there are methods and options to keep the interest down and even to guarantee an inheritance for your loved ones.
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.
The equity release process typically takes this route:
- First a free, initial, no-obligation telephone conversation with an equity release company 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 face-to-face consultation in your own home with an appointed specialist adviser can be arranged.
- During this meeting the finer details will be broken down into clear, understandable segments of information and applied to your unique situation and all alternatives will be explored with no pressure to proceed. Your adviser can look into the effects of equity release on any benefits you are receiving all as a part of the service.
- 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 property 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 initial meeting to answer further questions is 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 can choose to 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 experts 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.
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 instantly. Once you have entered your details an informative equity release guide will be made available to you 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 specialist who can provide free initial advice based on your unique details and answer any questions you may have.
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 (http://www.fsa.gov.uk/register/home.do) under reference 610205. In using this website I give express consent to Responsible Life Limited to contact me on the details provided from time to time. Calls may be recorded for training and quality purposes. This is a Lifetime mortgage which may reduce the value of your estate and may affect your entitlement to state benefits. To understand the features and risks ask for a personalised illustration. Any information contained herein is a personal opinion of the author and should not be considered to be advice of any kind. Inheritance Tax planning is not regulated by the FCA. Think carefully before securing other debts against your home. By consolidating your debts into a mortgage you may be required to pay more over the entire term than you would with your existing debt. Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,295. Our adviser will talk through the setting up costs of a lifetime mortgage before you make any decision to proceed.