Equity release can play a crucial role in retirement funding
Products that meet the Equity Release Council product standards have safeguards and flexibility built in to them, which enables thousands of home owners every year to tap safely in to their housing wealth without having to worry about making monthly repayments.
Equity release enables people to use the capital that they have in their property in a number of different ways, to:
- give gifts to the family during their lifetime that can help to reduce liability to Inheritance Tax;
- supplement any savings and pensions to fund their own retirement;
- provide a capital lump sum to assist a son or daughter in purchasing property with a deposit;
- release funds from a property on a divorce, to allow both parties to have a home.
What is Equity Release?
Equity Release allows individuals aged 55 and over to release money from the property they live in. This money is released, without the need to make any monthly repayments and without the need to move out of your home.
Equity Release products are regulated by the Financial Conduct Authority (FCA). By using an equity release product, you can take a lump sum, or regular smaller sums, from the value of your home.
There are three types of equity release:
- Lifetime Mortgages;
- Home Reversion; and
- Home Income plans.
Lifetime Mortgage Schemes
With Lifetime Mortgage schemes you take out a loan based on the value of your home. This loan is secured against your home, and releases a tax free lump sum. There are no monthly repayments, as the interest is added to the loan, and the loan is only repaid when your home is sold or if you move into long term residential care. Sometimes the loan is flexible, so you can draw down smaller amounts at different times.
Home Reversion Schemes
Under this arrangement you sell the whole, or a part, of your property to the equity release company. You can live in your home for as long as you wish. The property is sold when you die, or move into long term residential care, and the equity release company receives a share of the proceeds in proportion to the percentage of the property you sold to them.
Home Income Plans
This type of scheme is similar to the Lifetime Mortgage scheme but, instead of receiving the loan by way of a lump sum, the loan is used to purchase an annuity that gives you a regular guaranteed income.
The first step is to take independent financial advice from an Independent Financial Adviser who specialises in Equity Release.
You will need advice about your options for you to be able to weigh up the advantages and disadvantages fully before you decide if equity release is right for you. You will need to speak to a specialist financial adviser who is qualified in equity release to help you understand the steps involved and talk you through your options. Things to consider include the effect this might have on state benefits, tax, and your estate.
Equity release is not right for everyone, but with the right financial advice based on your individual personal circumstances, you will be able to make that choice.
Once you have spoken with your financial adviser and have made the decision to take out an equity release plan, we are here to answer your questions and, if you decide to proceed, ensure that the transaction goes through as smoothly and as quickly as possible.
Browns Solicitors is a member of the Equity Release Council. All the Equity Release Council’s members follow a strict Statement of Principles, which ensures we act in your best interests. As an equity release customer, you have the right to independent legal advice so you fully understand the cost and commitments involved.
If you think Equity Release is the right choice for you, please telephone the office to make an appointment for a free half-hour initial consultation.