I think you’ll agree with me when I say…
Trying to understand how equity release works can be confusing, especially if you do not have access to the right information.
Moreover, considering the numbers of hours, you have to spend researching, and the expenses that come with professional consultations, getting by this financial plan can be a daunting task.
Well, by checking out this straightforward guide, you can finally get to know how this scheme works without you breaking a sweat or your bank.
How Much Equity Can You Release? Use Our Home Equity Release Calculator
Speak to an Expert » Get a FREE Equity Release Quote Now
Unlocking the Equity Tied Up in Your Property
There are over ten ways to release equity from your estate. 40% of homeowners in the UK opt to sell up and downsize to a smaller home. But then again, what if you don’t want to move out of the family home you love – where you’ve made lots of happy memories over the years with your kids and partner?
That is when you turn to equity release.
Primarily, equity release is accessible to proprietors where the youngest spouse or partner on the deeds is at least aged 55, or in other cases, 60.
It works by permitting eligible homeowners to raise tax-free cash from the equity tied up in their property. The amount that you can release depends on an age-related ascending percentage of the value of the estate. In other words, the older you are, the more cash you can release!
For instance, if a single person aged 65 is in perfect health, and has a property value of £500,000, he could raise a maximum of 30% of the property value. It would then mean a maximum equity release of up to £150,000 with a plan provider like Aviva or LV.
It gets better:
Recently, equity release companies have introduced the impaired life schemes that provide ‘enhanced’ rates to those who are not as fit and healthy as they used to be, and these plans increase the percentage that you can withdraw from your reserve.
Consequently, if the same person aged 65, but he/she was a smoker with high blood pressure, Type 2 diabetes & a history of heart attacks, it means that they could get more, probably from £180,000 up to £190,500 with the enhanced lifetime mortgage scheme.
More on the Workings of Equity Release Schemes
As previously mentioned, the minimum age to be eligible for equity release is 55. It would also help if you were a homeowner. Even if you still have a small mortgage on your estate, you could still be eligible – the catch is it has to be the first thing to cross off on your ‘debts’ list once you release the cash.
When you’ve cleared your mortgage and have more cash in your reserve, then you’ve the right to spend it as you wish – you won’t have to make any monthly repayments. You only have to pay back the loan (plus interest) when you decide to sell the house – which will typically be when you die or move out permanently (into long-term residential care).
There are different modes of releasing equity, but there are two primary plans: lifetime mortgages (the most popular option) and home reversions schemes, which you can find out more about in ‘Types of Equity Release Schemes.’
How Does Equity Release Work?
It’s a straightforward process.
When you’ve done in-depth research and carefully considered your options, then you can get the ball rolling.
The process can vary from an individual to another, and lender to lender. However, you need to ensure that you’ve plenty of support along the way.
Here’s an idea of the steps you can expect:
- First things first, to be sure that you’re eligible; you need to talk to an expert. You won’t have to take things any further if you don’t qualify.
- Consult your financial adviser – you can do this over the phone or in person. They will answer your questions and guide you appropriately in your decision and whether it’s the best solution for you. They will confirm the advice you will get to you in writing before you make any further decisions.
- Plan for a follow-up meeting – talk through the advice you got from your adviser. You will have the chance to ask any other burning questions you might have and make sure that you’re ready to proceed with the process.
- Fill in your application with the help of your adviser. The might even offer to submit the application on your behalf, and if the equity release company acknowledges it, then your provider will give you a valuation.
- Head to the solicitor’s office – talk to him/her about your offer and ensure you get independent legal advice. They will carefully look at all the legal details and walk you through them. After they scrutinise the proposal and you accept, your equity release scheme will be set up for you.
- Acquire your equity through your solicitor and finally get on with putting those plans into action.
See, it’s straightforward.
All you have to do is to ensure that you’ve received proper guidance along the way, and when it’s done, you’ll have access to the cash you need for the retirement you deserve.
How Soon Can You Unlock the Cash From Your Home?
It varies from one plan provider to another. However, for most companies like Legal & General, the minimum number of weeks is around 8-12 weeks, from the day they receive your application to the day your solicitor sends you your cash.
Like any other financial product, equity release is not something you should rush into. So, take your time, prudently consider your options and then make an informed decision. It would be best if you also kept in mind that taking out a lifetime mortgage scheme reduces your inheritance, so it would be wise to involve your family in your choice too.
That said, if you’ve got any questions or need more information on what equity release is, lifetime mortgages and home reversion plans, then be sure to click here not only see how much equity you can release but to chat with an expert for free!
How much money could you release?
An equity release allows you to access the value of your home, tax-free without having to sell up, so that you can have money to spend on whatever you want or need.