Equity Release Explained

Equity release is a way of releasing the wealth tied up in your property without having to sell it and move to another home.

You can either borrow against the value of your home or sell all or part of it in exchange for a lump sum or a regular monthly income.

Equity release means retaining the ownership of your home while also unlocking the equity tied into your home. The ‘catch’ with equity release plans is that you repay the capital you released plus the interest accrued when you pass on or move into permanent care.

Equity release plans are fantastic. You get the financial freedom you need, and you can spend the cash you release to do whatsoever you’ve always wanted to do.

You also don’t have to make any monthly repayments since you repay the loan when you die or move into permanent care.

Nonetheless, if you want to leave an inheritance, it might not be the best option for you. If you’ve looked at other alternatives and still feel that it’s your best choice, then you must consider ring-fencing some of the value of your estate.

In as much as equity release plans offer you several benefits (like financial freedom), they have numerous drawbacks. Some of these include:

• You’ll leave behind a reduced inheritance
• There’s ‘rolled up’ interest on the lifetime mortgage plan
• There are limits to the amount you can release
• It may affect your state-entitled benefits
• You’ll miss out on increasing estate values

For you to qualify for equity release you must:

Be at least 55

Own property valued at £70,000 and above

Whether you qualify for equity release is based on the age of the youngest person on the Title Deed & your property. Lifetime mortgages, for example, will require you to be at least 55, whereas with a home reversion plan, you’ll have to be at least 65. You must also:

• own your home,
• or have it on a freehold basis,
• it also helps if your residence is in good condition.

It’s also vital to keep in mind that the lowest property value accepted by the equity release sector is £70,000.

If you want to release a cash lump sum from your estate and are under the age of 55, you can’t qualify for a regular equity release plan.

However, you can always seek out expert advice to find alternative solutions.

The amount of equity you can unlock ranges from about 20% to 50% of your estate’s value. Nonetheless, this depends on:

• The age of the youngest borrower
• Your estate’s market value
• Your medical condition

Typically, the older you are, or if you have any pre-existing conditions like blood pressure, the more equity you can release.

It typically depends on the equity release provider you pick.

However, equity release costs include application fees like financial advice fees, lender’s costs, realty appraisal fees, and professional costs.

These typically range from £900 to about £2000. There’s also the interest charged on loan.

Yes, you can. However, you must ensure that the new estate meets the set requirements by your plan provider.

Typically, equity release companies don’t lend on retirement homes. However, they might inflict additional restrictions on the type of house you can move to, as well as how the estate was constructed.

How long your application will take depends on the plan provider and the type of plan you choose.

Lifetime mortgages usually take about four to six weeks. In comparison, home reversion plans take six to eight weeks, provided that the title on the estate’s clear.

Yes, you can use your equity from one residence to purchase another property, and there are many perks to doing so.

If you live in an unwavering dwelling and are interested in buying a rental residence, it may make sense to use the equity in your principal residence toward the down payments on an investment property.

The maximum percentage of equity you can release from the capital tied up in your property is usually 60%.

However, the amount of money you can release is typically dependent on your age, medical history, and your estate’s market value (it has to be valued at more than £70,000).