Equity Release
If you're thinking of releasing equity from your home, you can just make sure you read our comprehensive guide first. With this guide, you'll gain an understanding of all aspects of equity release and the considerations to take into account before making a decision. If you have any questions about equity release or need help exploring your options, don't hesitate to contact us.
Equity release can be an excellent option for those needing capital from their home. However, it is essential to fully comprehend the risks and benefits of this form of finance before taking any steps forward. We will provide you will information to help you make a well-informed choice while releasing equity from your home. We can help you make the right decision regarding equity release by providing guidance on how to go about it and outlining your options. If you have any queries or doubts, don’t hesitate to contact our expert advisers. They will take you on a journey toward unlocking your potential dormant wealth.
What is Equity Release?
Equity release enables homeowners to access a portion of the market value of their home, less any debts they have secured against it, into tax-free cash that can be use for numerous reasons. The products are typically offered as either a lump sum or regular smaller payments, depending on the individual’s needs and wants. It can be used to finance anything from home improvements to supporting a family member. It’s important to note that this is only applicable to homeowners who are 55 or over.
How Does Equity Release Work
It is a great way for homeowners to access the money stored in their home without relocating. A lifetime mortgage and home reversion plan are two of the most common methods used with equity release. You can obtain a loan secured against your property or receive lump sum or regular payments in exchange for selling part (or all) of your property. And best of all – when using a lifetime mortgage, there’s an option where no monthly repayments need be made!
Equity released through these plans can be used for any purpose the homeowner wishes. However, it’s important to consider all factors before deciding, and we recommend seeking independent financial advice before proceeding with any equity release plan.
The Benefits of Equity Release
There are many benefits associated with taking out equity release. First, equity release can be used for any purpose, allowing you more flexibility than other financial products.
1. It allows you to access the cash tied up in your home without having to move house
2. Equity can be used for any purpose, giving you more flexibility than other financial products
3. It allows you to use your property as collateral and receive funds as needed
4. It products are typically flexible and can be tailored to your individual needs
5. It provides peace of mind knowing that your property will remain in your ownership until death or you move into long-term care
6. It does not affect pension credit or other benefits from the government
7. It can help reduce inheritance tax liability
Equity release could be a great option for people who need money in their home. However, before taking the plunge and releasing equity, it’s important to understand the risks and benefits of this type of financial product. Our comprehensive guide will help you make an informed decision about releasing equity from your home. We’ll cover all aspects of equity release, from how you can go about it to the implications and considerations of taking this route. If you’re still unsure or have any queries, don’t hesitate to contact us for help. So get started on your equity release journey today by reading our guide!
Risks of Equity Release
As with any financial product, it’s important to know the associated risks before deciding on equity release. For example, equity release plans typically come with higher interest rates than other mortgage products and can reduce the inheritance you leave behind for future generations. It’s also important to note that equity release plans have strict eligibility criteria, so you should get advice from an independent financial adviser to ensure you meet all the requirements.
Types of Equity Release Products
There are two main types of products: lifetime mortgages and home reversion plans. Below the details about these products are outlined:
Lifetime Mortgages
Lifetime mortgages are the most common form of equity release. With this type of product, homeowners over 55 can access a lump sum or regular payments by taking out a loan secured against their property. The loan is typically repaid when the homeowner moves into long-term care, dies or sells their home.
Lifetime mortgages offer greater flexibility than other equity release products, allowing the homeowner to decide how much they want to borrow and when they will make their repayments (if any). However, it’s important to note that equity release plans typically have higher interest rates than traditional mortgages.
Home Reversion Plans
Home reversion plans allow homeowners over 65 to access a lump sum or regular payments by selling either part or all of their property. With this type of product, homeowners can sell their property in exchange for a lump sum or regular payments while retaining the right to live there rent-free until death or they move into long-term care.
Home reversion plans typically provide a higher lump sum payment than lifetime mortgages, but may not be as flexible in terms of repayment options. Equity released through this type of equity release product can be used for any purpose the homeowner wishes. It’s important to consider all factors before deciding on a home reversion plan and we recommend seeking independent financial advice before proceeding.
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Thinking of getting a mortgage? Our experienced team of skilled mortgage advisers are here to offer the essential guidance you require. Relying on our comprehensive understanding of the mortgage market, we’ll ensure you secure the perfect mortgage to suit your specific situation. Click the “Contact Us” button.
Pros and Cons of Equity Release Products
Before deciding on equity release it is important to consider both the pros and cons of these products. It can provide an opportunity to access funds without having to sell your home, however, it also comes with risks such as higher interest rates, reduced inheritance payments and potential restrictions on future opportunities. Below we outline some of the pros and cons of equity release products.
Pros
- Allows homeowners over the age of 55 to access funds without having to sell their home
- Flexible repayment options available
- Can reduce inheritance tax liability
- Provides peace of mind knowing that your property will remain in your ownership until death or you move into long-term care.
Cons
- Equity release plans typically come with higher interest rates than traditional mortgages
- It can reduce the amount of inheritance you leave behind for future generations
- Plans have strict eligibility criteria, so it’s important to get advice from an independent financial adviser to ensure you meet all the requirements
- Equity release plans can limit future borrowing or mortgage opportunities
How Long Does Equity Release Take?
The time it takes to complete equity release transactions can vary depending on the product and lender chosen. Generally speaking, equity release applications can take between 4-8 weeks to process. This timeline may be longer depending on individual circumstances and lenders’ policies. It is important to note that equity release plans require a great deal of paperwork and require both the homeowner and lender to complete a series of checks before approval. As such, equity release plans should not be entered lightly, and homeowners must seek independent financial advice before proceeding with equity release.
Is Equity Release Safe?
Interesting question! It can be a valuable financial resource for a homeowner that needs to raise capital. However, they do come with risks. Equity release plans are regulated by the Financial Conduct Authority (FCA) and are only available to homeowners over 55. Equity release providers will also typically require you to seek independent legal and financial advice before proceeding with equity release plans. This will help ensure that all parties understand the implications of equity release.
Equity Release Advice
Equity release advice is essential for anyone considering this product. Here are some key bullet points of equity release advice to bear in mind:
- Always seek independent legal and financial advice before proceeding with equity release plans.
- Ensure that you understand all the terms and conditions associated with equity release plans, including the fees and interest rates. Take your time to consider all equity release options available and make sure they’re right for you and your situation.
- Consider the impact equity release plans may have on inheritance payments, future borrowing or mortgage opportunities.
- Speak with equity release providers to ensure that their products are suitable for your needs and that you understand the equity release process.
- Make sure you feel comfortable and confident with all equity release plans before signing any contracts or agreements.
Alternatives to Equity Release
If equity release is not the right option for you, there are other alternatives that may be more suitable. These include downsizing your home to access the equity held in it, taking out a traditional mortgage or loan, accessing other forms of secured borrowing such as a second charge mortgage or lifetime mortgage, applying for a credit card or personal loan, or taking out an equity release plan with a trusted provider. Each of these alternatives comes with its own risks and benefits, so it is important to speak to an independent financial adviser to ensure you are making the most informed decision possible.
Final Thought
Equity release could be a great way to access the cash in your home without having to move. Equity release products are typically flexible and tailored to individual needs, giving you more freedom when it comes to accessing funds. Before taking out equity release, make sure you understand all aspects of this product, including the risks and benefits. Most importantly, seek independent financial advice to ensure equity release is the right option for you. Releasing equity is a major decision and should not be taken lightly.
FAQs: Equity Release
Most frequent questions and answers about equity release.
It can be a good idea in certain circumstances, but it is important to seek independent financial advice before proceeding with equity release plans. Equity release should only be entered into after fully understanding the risks and implications of equity release plans.
The amount of equity that can be released through equity release plans depends on your age, the value of your home and any outstanding mortgages or secured loans. Typically equity release customers can access up to 55% of their home’s value.
Yes, equity release plans are tax free. Equity release customers do not have to pay Income Tax or Capital Gains Tax on equity release payments.
Yes, equity release plans typically provide customers with the option to sell their home if they wish. Equity release providers will usually agree to release the remaining equity when a sale is completed.
No, equity release plans are typically only available to customers aged 55 and over. Equity release providers will not offer equity release plans to those under this age. It is important to seek independent financial advice if equity release is being considered.
Yes, equity release plans can be taken out if you have an outstanding mortgage. Equity release customers must ensure that any equity release payments are sufficient to cover the remaining balance of their mortgage.
Yes, you can take out on leasehold properties. Equity release customers must check the terms of their lease to ensure equity release is permitted.
When equity release customers pass away, equity release providers will repossess the home and use the proceeds of the sale to repay any outstanding equity release funds. Any remaining equity will be paid to the customer’s estate.
What next?
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About the Author
Liz Syms is the CEO and Founder of Connect Mortgages, a specialist in finance for property investment. With over 25 years of experience in mortgages and financial services, Liz has helped countless people get their dream homes and investment properties. She is passionate about giving her clients the best advice possible when it comes to financial decisions relating to mortgages and protection and is dedicated to providing the highest quality of service. With her wealth of knowledge in the industry, Liz is a respected leader in mortgages and financial services and has grown her team to over 300 advisers nationally. She strives to make Connect Mortgages one of the most successful companies in its field.
About the Author
Liz Syms is the CEO and Founder of Connect Mortgages, a specialist in finance for property investment. With over 25 years of experience in mortgages and financial services, Liz has helped countless people get their dream homes and investment properties. She is passionate about giving her clients the best advice possible when it comes to financial decisions relating to mortgages and protection and is dedicated to providing the highest quality of service. With her wealth of knowledge in the industry, Liz is a respected leader in mortgages and financial services and has grown her team to over 300 advisers nationally. She strives to make Connect Mortgages one of the most successful companies in its field.