Equity Release

Equity Release

Equity Release Schemes enable homeowners aged 55 plus to unlock the equity in their homes by releasing a tax-free cash sum.

For many people, it’s becoming increasingly common to consider equity release to provide financial freedom both before and after retirement.

Popular reasons for releasing equity include:

• Create income in retirement
• Gift money to family members
• Pay for home improvements
• Repayment of mortgage
• Consolidate debts

Equity Release Plans fall into two main categories – Lifetime Mortgages and Home Reversion plans.

Lifetime Mortgages

These are loans secured against the value of your property. You take a tax-free lump sum and normally no repayments are required during your lifetime, with interest rolled-up and added to the loan.

You retain 100% ownership of your home. Lifetime mortgages remain in force until the last homeowner has died or moved into care. At that point the property is usually sold, the provider repaid the original loan plus accrued interest, and any surplus passes back to the borrower’s estate.

Lifetime mortgages have now become more flexible and allow voluntary payments to be made back to the lender of up to 15% per annum of the original loan amount borrowed, with no penalty or proof of income required.

Lifetime Mortgages fall into two main types – Drawdown and Lump Sum schemes.

Drawdown Plans

Lenders calculate your maximum cash facility based on the age and property value. A decision is made as to how much of this facility the borrower initially requires. Any unused cash is held by the lender, ready for further cash withdrawals to be taken in the future. The main advantage is that interest is only charged on amounts withdrawn, not on the cash reserve facility remaining.

Lump Sum Schemes

These allow a simple one-off tax-free lump sum release with no monthly payments required. Lump sum schemes may provide an opportunity for further borrowing in the future, however the amount available to you will be based on your age and property value at that time.

Home Reversion Plans

These equity release schemes allow you to release some, or all of the value tied up in your home, by selling your property to an investment company. In exchange, you will receive a cash lump sum, or income. You have the right to remain in the property on a Lifetime Lease, and live rent free for the rest of your life.

All schemes can be viewed by clicking this link to our Equity Release Best Buy Tables.

Consumer Safeguards

Whilst equity release is not suitable for everyone, there are safeguards provided by the Financial Conduct Authority (FCA) and the Equity Release Council.

The FCA is the governing body regulating financial services and the sale of equity release products.  These rules include the requirement that all customers who buy equity release plans are fully advised.

The Equity Release Council is the trade body that represents the equity release sector. It promotes high standards of conduct and practice in the provision of advice on equity release including:

• The right to remain in your property for life, or until you need to move into long-term care
• The right to move to another property, subject to the new home being acceptable to your lender
• The plan includes a ‘No Negative Equity Guarantee’, meaning you or your estate will not be liable to repay the lender anything above the eventual sale price

The final layer of protection for homeowners releasing equity is that of an independent solicitor, who must carry out all your legal work. Both you and your solicitor will be required to sign a certificate confirming your rights and obligations have been clearly explained.

Next steps…

It is essential that you seek advice from a specialist independent equity release adviser. That’s why WhatMortgage are pleased to have partnered with Equity Release Supermarket, one of the UK’s leading independent equity release advice firms. They offer a free initial, no-obligation consultation with one of their experts in the comfort of your own home, or over the telephone – it’s your choice.

To discuss your equity release options with an adviser, or check whether you qualify for an equity release plan, please call our chosen partner – Equity Release Supermarket on Freephone 0800 689 1378

WhatMortgage also provide some handy tools. Our FREE Equity Release Calculator will provide an indication of the maximum release available.

In addition, our Equity Release Best Buy tables help you compare all the schemes available.

There will be a fee for lifetime mortgage advice. This will depend on your circumstances, but we estimate it to be £995.

These are lifetime mortgage and home reversion plans. To understand their features and risks, ask for a personalised illustration.