How can you benefit from releasing cash from your home?
Equity release is the term used to describe a range of financial products which allow people aged 55 or over to access cash that is tied up in their home. The money can be released either as a lump sum, in a number of small amounts, or as a combination of the two.
The options available for equity release
Equity release schemes are available in two different ‘options’; the first being a lifetime mortgage. A lifetime mortgage is a mortgage which is secured on your home, as long as it is your main residence, whilst allowing you to retain ownership. You can decide whether you would like to ‘ring-fence’ some of the value of your home with the intention of leaving it as an inheritance to your family. In addition, you can decide whether you’d like to repay the mortgage or to the let the interest build up. The amount of the loan, plus any accrued interest, is then paid back when you die or if you move into a care home, usually from the proceeds of the sale of the house.
The second option is home reversion. This option requires you to sell part or your entire home to a reversion provider in exchange for a lump sum, regular payments or a combination of the two. Provided you agree to maintain and insure your home, you will have the right to live in it rent free until you die and as with a lifetime mortgage, it is possible to ring-fence a percentage of your property. However, the value of the percentage you ring-fence will always remain the same, regardless of whether the value of your home changes, unless you choose to release further cash. Once the plan ends, your property will be sold and the proceeds of the sale will be shared according to the proportions of ownership which remain.
The pros and cons of equity release
Equity release schemes do have their pros and cons and although my view is that they should generally be considered as a last resort, I do understand that increasing numbers of people are facing retirement without sufficient savings.
What should you be aware of?
Because equity release schemes have their pros and cons there are a number of potential pitfalls you should watch out for before deciding to go down the equity release route. Amongst other things, you need to ask yourself whether you really need to release the equity in your home as there may well be other options available. However, if you feel that equity release is right for you, it is essential that you seek independent financial advice, rather than approaching an equity release provider directly.
If you are thinking about releasing the cash in your home, I am qualified to provide objective, impartial advice on the range of options available. If you would like to find out more, please don’t hesitate to get in touch for more information, or to arrange an appointment.
The initial consultation process is at our expense, but fees are charged for the preparation of legal documents, financial advice, etc and full terms of business will be disclosed in writing prior to undertaking any chargeable work.