Fact #1: Equity Release Is Regulated by the Government
Equity release is regulated by the Financial Conduct Authority (FCA)1with strict rules to ensure the protection of consumers.
Fact #2: With a Lifetime Mortgage, You Retain 100% Of Homeownership
With a lifetime mortgage, you retain the full ownership of your property.
You get to stay in your home and continue enjoying all it has to offer: security, stability, comfort and pride of owning a valuable asset that is increasing over time.
Fact #3: You Will Never Be in Debt More Than the Value of Your Property
You will never be in debt more than the value of your property.
If you sell your home and release equity, equity release providers cap repayments to no more than 25% or £50,000 whichever is greater than the sale price.
Fact #4: The Cash Is Tax‑Free
You won’t not have to pay any Income Tax or Capital Gains Tax2 on the release of your equity.
Fact #5: You Must Be at Least 55 Years Old to Release Equity Through Equity Release
However, there is no maximum age requirement and you can take out a lifetime mortgage from the day you buy your first property – even if that’s when you’re in your 50s or 60s!
Fact #6: There Is a Minimum Home Value
Your home must be worth at least £150,000 to release equity – but in some cases, you can still access up to 60% of the value of your property.
Fact #7: Lenders May Take Your Health and Lifestyle Into Account
Some lenders, such as the Equity Release Providers Association (ERPA), will consider your health and lifestyle when deciding what type of equity release to offer you.
Fact #8: The Interest Rate Can Be Fixed for Life
Some lenders, such as Equity Release Providers Association (ERPA) offer a Fixed Interest Rate3 for life.
So you’ll know what your monthly repayments will be and how much it costs to release equity from the day of purchase.
Fact #9: The Debt Won’t Be Passed On
If you sell your property while still making repayments, the debt will not be passed on to the new buyer.
Fact #10: A Solicitor of Your Choosing Will Talk You Through the Terms and Conditions
Once you’ve found the equity release that suits your needs, a solicitor of your choosing will talk to you about the terms and conditions.
Is Equity Release Safe?
Yes, equity release is safe. The product has been in the UK for more than 40 years and there are strict regulations to protect you from over-borrowing or investment losses.
What Is the Interest Rate on Equity Release?
The interest rates on equity release are typically between 3% – 5% but it will depend on the product and age of your property.
How Much Equity Release Will I Be Able to Access?
The lender’s decision as to how much you can borrow and the amount you’ll need for your monthly repayments is based on a number of factors, such as income, outgoings and value of the property.
For example, if your home is worth £250,000 but only has an outstanding mortgage balance of £150k then the maximum repayment that could be secured would be around 60% (£90k) – this means that lenders are not obliged to offer 100%. Your solicitor should discuss these matters with you in detail before going ahead.
What Happens if I Don't Keep Up With Repayments?
Your property will be repossessed. In some cases, the lender may sell your home and give you any money left over after they’ve paid off the loan in full from other sources.
You could also lose out on your freehold or leasehold rights to your house, depending on what type of equity release contract you have signed.
Equity release is a way to unlock the value of your property without selling it or moving. It’s an alternative financial strategy that may be right for you if you have enough equity in your home and want to use this as collateral against a loan.
You can take out loans with fixed-term repayments, flexible repayment amounts, and interest rates based on age (i.e., 20% APR).
Whether you need money now or future income security, equity release could help free up cash flow by giving you access to funds from the sale price of your house while still living there.
Check out our article on Equity Release.