As an Equity Release specialist, these are questions that I am asked very frequently (“Reverse mortgage” is the American term for equity release, which can cause initial confusion)! The simple answer? There isn’t one.

Why? Equity release is a complex process and the results can vary depending on your home, your age, your current financial situation and how much cash you want to withdraw. Without careful consideration, any equity release scheme – or reverse mortgage – can be a fantastic opportunity or a financial disadvantage – which is why it’s so essential that you take professional, impartial advice before signing up.

When is equity release a good idea?

Over the last decade or more, house values have increased at a staggering rate while incomes have struggled to keep pace. This means that a vast number of homeowners have more wealth tied up in their homes than in their savings accounts.

Once retirement hits, those relying on a state pension may find that their reduced income causes a significant drop in quality of life and that they can no longer afford the larger purchases they are used to. Equity release provides an alternative source of funds, converting the wealth that’s locked up in your home into cash – without you having to move out.

There are two main options with equity release; lifetime mortgages and home reversion plans. In either case, any money that you borrow will not need to be repaid until you move into long-term care and sell your home, or pass away.

What is a lifetime mortgage?

In a nutshell, a lifetime mortgage is a form of tax-free equity release that secures a loan against your home based on its value. Lifetime mortgages offer some flexibility in terms of payment structure, with a lump sum or monthly instalments allowing you to receive money how you’d like.

With the security of keeping your home, you typically have the option of releasing between £10,000 and £100,000. Use our equity release calculator to see how much you could release. If there is still some mortgage to pay on your home, the money you release will pay this off first.

Once the outstanding mortgage has been redeemed, it’s up to you how you spend the money after that. Common uses for lifetime mortgage equity include home improvements, travel and helping your children to get on the property ladder.

• Tax-free lump sum
• You keep ownership of your home
• Flexible equity release; lump sum or regular instalments
• Continue to live in your home or you are free to move house

Home reversion plans

Home reversion plans allow homeowners to sell some or all of their property for cash in retirement while still living there until death or going into care. It applies to over 65s, provides a tax-free lump sum or income and your family gets your share of the proceeds from the sale of your home when the time comes.

The exact figures should be calculated by a financial advisor but it’s common for 25% of your home’s current market value to be released. This percentage may rise depending on your age, with more becoming available to those who are older. Home reversion plans can be used to pay for your care, pass on as inheritance or help make the most of your retirement.

Both options allow you to protect a certain portion of your property value so that it can be passed on through inheritance and, depending on the scheme you choose, you may be able to pay back interest or small amounts to limit the final repayment sum. However, the main difference is that a lifetime mortgage means your home remains yours while a home reversion plan means you no longer own all of it.

When might another option be more suitable?

Downsizing is a popular alternative to equity release, although it comes with the requirement of leaving your family home, which not everyone is prepared to do. Households that are currently receiving (or are planning on receiving) any means-tested state benefits may also find that equity release impacts their eligibility.

There may be many factors as to why certain equity release schemes will or won’t be suitable, which is why it’s essential to talk your decisions through with family members, close friends and – most importantly – an impartial financial advisor.

Contact me for more information

The UK equity release market is growing by about a quarter each year. If you are considering the potential of equity release (or a ‘reverse mortgage’) to enjoy a more comfortable lifestyle in your later years, there is a wealth of different products and schemes available to suit all kinds of situations.

For more information, please contact me or email me at

john.whyte@therightequityrelease.co.uk and we can take a look at your options. Initial consultations are always free of charge and without obligation, and you are welcome to visit our office in Worthing or I can arrange to meet you at your home.

Equity Release is a popular financial product for the over-55s that can help unlock the value built up in your home. At John Whyte Equity Release, we have many years’ experience providing expert advice, so you get the right equity release plan for your individual needs. You can use the money in any way you wish, there’s no need to move out and you will still own your own home. But what happens when you are no longer able to live there?

At some point in the future, moving into a residential home or nursing home could become a necessity, should you no longer be able to live unassisted in your own home. While this could well be the best solution for your physical health and mental wellbeing, it would mean having to move out of your home. Importantly, if you have a Lifetime Mortgage, this would be affected.

Single or joint equity release?

For individual equity release plans – i.e., agreed by a single homeowner whose name is the only one on the property deeds – moving into long-term care will bring the agreement to an end. This means the final balance (the amount borrowed plus any accrued interest) is now due for repayment in full.

For joint equity release plans – i.e., agreed by both parties whose names are on the property deeds – the agreement does not end when one homeowner moves into long-term care. While the provider must be notified that one of the plan holders no longer lives there, the other plan holder can carry on living there until they move into care themselves or pass away.

In all cases, the equity release mortgage will come to an end when the final occupant moves into long-term care or passes away.

What happens when the plan ends?

Winding up an equity release plan after the last occupant has left the property will be the responsibility of whoever is dealing with your affairs, or the executors of your will. The process involves

• Choosing a preferred estate agent and obtaining a current market valuation
• Marketing the property and agreeing the sale
• Ensuring vacant possession upon completion of the sale

Interest on the Lifetime Mortgage will accumulate until it is repaid, which makes a speedy property sale a desirable outcome for all concerned.

The equity release provider will normally allow a timeframe of 12 months for your executors to complete the property sale and repay the debt in full. If this is not achieved, there will be a review of the case. If no other agreement can be reached, the property could ultimately be sold by the lender.

No Negative Equity Guarantee

In the unlikely event that the value of the property and the sale price achieved is less than the outstanding loan, the No Negative Equity Guarantee comes into play. The mortgage lender will then take charge to ensure that the property is sold for the best possible price to minimise their losses.

If you have a Lifetime Mortgage through John Whyte Equity Release, be reassured that we are members of the Equity Release Council, meaning we provide a No Negative Equity Guarantee on all our equity release plans.

This guarantee offers valuable protection against negative property price fluctuations that could otherwise leave your family out of pocket when it comes to repaying the loan. In other words, with a No Negative Equity Guarantee, the beneficiaries will never have to repay more than the property is worth when it is sold.

Does the property have to be sold?

When the equity release plan comes to an end, selling the property is the obvious solution to repay the Lifetime Mortgage. Once the debt is repaid, any remaining proceeds can then be shared among your family members or heirs. However, the sale of the property is not the only option. Your family can retain ownership of your home if there are other funds available to settle the mortgage repayment in full within the stated 12-month period.

Do bear in mind that the above only applies to Lifetime Mortgages. If you have a Home Reversion Plan, an alternative type of equity release that involves selling a share of your home rather than taking out a loan against it, ownership of the property will revert to the lender when you move into long-term care or pass away. The property will then be sold, and the proceeds shared in accordance with the lender agreement. Any money left over will go to the homeowner’s family or heirs.

Get in touch

For more information about Lifetime Mortgages and to help you decide which plan is best for you, John Whyte Equity Release is always available for expert advice. Call us on 01903 890660 or message us your enquiry here.

To understand the features and risks of a Lifetime Mortgage, please ask for a personalised illustration.

For many people, their home is their most valuable asset. While it is good to have a valuable property, it can also leave homeowners in the situation where they would like to access some of the money tied up in their home to fund them into their retirement.

In this situation, homeowners have two main options. They can either choose to downsize by selling their property and buying a less expensive home, or they can opt for equity release. Equity release comes in two forms: the lifetime mortgage and the home reversion plan.

A lifetime mortgage involves taking out a mortgage secured with your property. A home reversion plan involves selling all or part of your home in return for regular payments or a lump sum.

Both downsizing and equity release have a range of potential benefits and drawbacks depending on the specifics of your circumstances and what you are looking for. In this blog, we look the pros and cons of downsizing and equity release to help you understand which one might be right for you.

The pros and cons of downsizing

Downsizing is the process of selling a large expensive property and buying a cheaper (and usually smaller) one, using the difference to fund your lifestyle or for any other spending.

There are a number of advantages here. The first is that as the income comes from your main home, you don’t need to pay any tax. So, you keep every penny of the difference between your old property and your new one. Additionally, as the money is entirely yours, there is no limit to what you can spend it on.

You also get the double benefit of downsizing that you will likely reduce your household bills. The home may also be more suitable for your lifestyle in later life.

However, downsizing does come with a couple of potential issues and challenges. The first is the stress and inconvenience of moving home. Moving home is one of the most stressful experiences for anyone, and this is especially true when you are moving from the property that has been your family home for many years.

It is also worth noting that downsizing incurs the natural costs of buying and selling properties. These come in the form of stamp duty, solicitors’ fees and moving costs – these will eat into the amount of money you take from the downsizing of your home.

The pros and cons of equity release

Probably the major advantage of equity release is that you get to stay in your home for as long as possible. Many people will have strong emotional attachment to their home; equity release allows you to hold onto it while still accessing some of its value.

Just as with selling your main property, equity release is tax-free so you will get all of the money that is owed to you via the scheme. This tax-free money can be used however you like; from funding your lifestyle, to making repairs and upgrades to the home.

Equity release will generally be a cheaper option for you than downsizing. There are no costs relating to issues such as stamp duty or conveyancing.

However, it is also important to understand that there are some trade-offs with equity release. Taking money from your home will naturally reduce the level of inheritance you have to give when you pass away.

It is also true that if you decide at any point that you want to pay off the equity release to functionally buy back the property, there are expensive early repayment fees.

How to decide between equity release and downsizing

What is perhaps most important to say is that it is vital that you should take advice on the best course of action for you. At John Whyte Equity Release, we provide professional and impartial advice relating to equity release. Get in contact with us today for more details.

To understand the features and risks of a lifetime mortgage, please ask for a personalised illustration.

If you’re over 55 years old, equity release is a well-known financial vehicle that enables you to release the cash tied up in your home while carrying on living there. As an independent equity release expert with decades of experience in the financial services industry, I can help you find the right plan for your needs and circumstances.

You can use the money for anything you like – the holiday of a lifetime, a financial leg-up for your children, boosting retirement income and much more besides. But what about buying property? Is it possible to take out an equity release plan specifically to buy yourself a new home, or an additional holiday home?

The short answer is: yes, you can. Here are two popular scenarios:

Scenario A:

You would like to buy a holiday home, either in the UK or abroad, in addition to your primary residence. Using equity release, you can use the equity released from your home to help with this purchase, thus enabling you to spend time in both properties.

Bear in mind that you will still need to live in your primary residence for at 50% of the year, and that you will probably be looking to buy the property outright, so there are no additional standard mortgage requirements to worry about. Don’t forget to factor in the cost of stamp duty for UK holiday homes, and currency exchange rate fluctuations if you buy abroad. Also, there’ll be solicitors’ fees to pay and any relevant local laws and regulations to observe.

Example:

Mr & Mrs Smith (both aged 60) have an outstanding mortgage of £35,000 on their home, which has a market value of £250,000. Based on their age, they are able to release a maximum of £90,500 which, once the mortgage has been cleared, leaves an overall budget of £55,000 for the purchase of a holiday home.

Scenario B:

You would like to move home but the price of your dream property is higher than you can afford. You have an existing mortgage you would like to pay off rather than borrowing more money and making larger monthly payments. With an equity release plan in place, you can use some of the funds to clear the outstanding mortgage when you sell your home, while the cash from the sale plus the remainder of the equity release will give you enough to purchase your new home.

The sale of your existing home, the redemption of your mortgage and the purchase of your new property are all finalised at the same time. The process is very similar to a regular property purchase, except that your new home will have an equity release later life mortgage on it.

You don’t have to make any payments to repay the interest, though you do have the option to do so, either with regular monthly payment or with ad-hoc voluntary payments.

Example:

Mr & Mrs Jones (both aged 60) have an outstanding mortgage of £35,000 on their home, which has a market value of £250,000. The net gain of the sale of the property is £215,000. Based on their age, they are able to release a maximum of £110,000 in equity as a standard lifetime mortgage, meaning they can afford to buy a new property worth £325,000.

If you are wondering what your personal budget would be, you can use our handy calculator to work out how much you could release. For a personal illustration and a free initial discussion, contact John Whyte Equity Release Specialist today.

Equity release may be an attractive financial proposition for many homeowners who wish to tap into the value of their property without having to move out. But before you sign on the dotted line to raise cash in your later years through equity release, please make sure you consider this huge financial decision within the context of your family. Decisions taken by you now will have an impact on your immediate family, which is why it is so important to involve your loved ones in the process.

What is a lifetime mortgage?

The most popular type of equity release plan is a lifetime mortgage. It is different to a regular mortgage in several respects, as is explained in a recent blog post here, and you need to be aged 55+ to be eligible.

As the name suggests, this is a mortgage that is redeemed at the end of your life (or when you move into long-term care). The loan is secured on your main residence while you retain ownership and carry on living there.

You have the option of ringfencing some of the value of the property as an inheritance for your family, and you can also choose to make regular repayments on the mortgage, or simply let the interest roll up. When you pass away, the loan and any accrued interest is redeemed. Since a lifetime mortgage affects the value of your estate after your death, it means there will be less to leave to your loved ones.

Why your family may have concerns

It is perfectly reasonable for your family to be sceptical of equity release. After all, they only want what’s best for you and you can’t blame them for wanting to protect you from being taken advantage of. It is also the case that equity release had a dubious reputation back in the 1980s which, thankfully, has now been put to rest. It is now a reputable financial strategy for older people with a property asset.

Importantly, the Equity Release Council was established in 1991 as the industry body for the UK equity release sector, and its members abide by Council rules. It “exists to promote high standards of conduct and practice in the provision of and advice on equity release which have consumer safeguards at its heart.” (Equity Release Council).

Another valid concern that your relatives may have is that taking out a lifetime mortgage will reduce the amount of their inheritance they would otherwise receive, since the mortgage is repaid through the proceeds of the sale of your property. However, you could use your tax-free lump sum obtained through equity release to help your family financially while you are still very much alive. Whether you gift a lump sum, help to pay the school fees or to get on the property ladder, they may not be missing out after all.

Explain your reasons for considering equity release

If you believe that a lifetime mortgage is the right choice for you, your family should know your reasons. Honesty and transparency are always the best policy, especially within the family. What are you hoping to achieve by releasing some of the equity tied up in your home? Are you looking to boost your retirement income or to go on a holiday of a lifetime? Perhaps you would like to pay off your existing mortgage, invest in a new kitchen or other home improvements? There is no reason why you should not use your wealth to make your retirement more comfortable.

Other motivations might be to pass a lump sum onto your family by way of a ‘living inheritance’, helping out financially when they need it most. From going to university to getting married and buying a first home – these are all expensive undertakings that parents and grandparents may wish to support. Talk to your family about their immediate needs and decide together on how you can best make a financial contribution.

What are the benefits of equity release?

It is unlikely that other members of your family will have done as much research into equity release as you have, which makes it your job in explaining to them the advantages of taking out a lifetime mortgage. These include

• Receiving a tax-free lump sum to enable you to lead a comfortable life in your old age
• Obtaining capital to help out family members financially and/or to spend on home improvements
• The ability to carry on living in your home until you go into long-term care or pass away
• Fixed interest rates, so you know exactly where you are financially without having to worry about market fluctuations
• The option to make monthly repayments in order to reduce the final loan repayment due after your death
• A ‘no negative equity’ guarantee which means you will never owe more than your house will sell for.

As with any financial decision, it is prudent to weigh up the pros and cons before making a commitment. Equity release is not the right choice for everyone, so it is important to show your family that you have thought long and hard about lifetime mortgages before reaching a positive conclusion.

Potential downsides to discuss may include:

Would you be able to move home with a lifetime mortgage? (The answer is yes, you can.)

How does equity release affect your inheritance? (It enables you to share your wealth while you’re alive.)

Will taking a tax-free lump sum affect your other benefits? (You could draw down in instalments instead.)

Speak to an equity release specialist together

Taking out a lifetime mortgage is a big step. Not only does it need to be the right decision for everyone concerned, but you need solid expert advice from an experienced equity release specialist. I have been working in financial services for well over 20 years, and as a specialist equity release broker I am a proud member of the Equity Release Council.

Based on my deep insight into the marketplace, I can help you choose the best lifetime mortgage for your needs. Including your family members in your equity release decision is the best way to ensure that your requirements are met perfectly. Please feel free to get in touch to ask any questions you or your family may have and ask for a personalised illustration.

If you are considering equity release as a long-term financial vehicle to unlock the cash tied up in your property, you will probably already have plans on how to use the funds.

Whether you take out a lifetime mortgage , equity release enables you to free up some of the value tied up in your home and release it back to you as cash, either as a lump sum or as several cash payments.

You can use the money for whatever you wish – to boost your retirement income, carry out home improvements, go on a once-in-a-lifetime holiday, help your children get onto the property ladder, pay school fees for the grandchildren… the list is endless.

What happens to your equity release plan upon death?

When you die, your home will typically be sold by the executors of your estate, and some of the proceeds will be used to pay back the equity release plan.

Lifetime mortgages are the most popular form of equity release and they will have to be paid off upon death – either via the sale of the property or with other available funds. Your net estate will then be distributed to the beneficiaries named in your Will. If the beneficiaries choose to keep the property as an investment, they could pay back the lender with a buy-to-let mortgage.

What is inheritance protection?

Taking out an equity release plan may lower the amount of your inheritance, and many people are concerned that there may not be a lot left to leave to your beneficiaries. One way to protect some of the value of your home to make sure that your family will definitely inherit a portion of it is to choose an equity release plan with a protected equity guarantee, also known as an inheritance protection guarantee.

Building this option into your lifetime mortgage allows you to ringfence a percentage of the property’s value. However, do bear in mind that the larger the amount is that you wish to protect, the lower the amount that you can release from your home. In other words, if you choose to protect 20%, the maximum amount you can obtain under an equity release plan will also be 20% lower.

How does equity release affect inheritance tax (IHT)?

When you release equity from your property, you reduce the value of your estate. This will most likely reduce the amount of inheritance tax payable on your death. In some cases, this could take the value of the estate below the IHT threshold of £325,000.

You should also bear in mind that your main residence has an additional IHT allowance, currently £175,000 per person, that can be added to the £325,000 nil band. This means that a couple can potentially leave a family home worth up to £1 million before any IHT becomes payable.

That said, the extra nil band does not apply to the equity released from the home if you have not actually spent the money. In that case, it would remain part of your estate and might become subject to IHT in due course.

Can you use equity release for gifting?

Subject to careful planning, you can gift some or all of the equity release funds as a Potentially Exempt Transfer. If you live for more than 7 years after making the gift, the money will be IHT exempt. However, if you pass away within 7 years, the amount will be counted as part of your estate and will be subject to IHT.

If you gift money from equity release and you pass away within 3 years, the gift will be charged at the full 40% IHT tax rate. If you die within 3-7 years of the gift being made, a sliding scale ‘taper relief’ will be applied, meaning the more time passes between the date of the gift and the date of death, the less tax will be payable.

What to do next?

If you are thinking about taking out an equity release plan and are worried about the impact on your future inheritance, the most sensible thing to do is to speak to an equity release specialist. Give me a call on 01903 890660 or contact me here so I can answer any questions you may have and help you choose the most suitable equity release plan for your personal circumstances.

Find answers to the most commonly asked questions about equity release in our blog here. If you can’t find the answer to your question below, or if you need any further information contact us.

What is equity release?

Equity release allows certain homeowners to access the equity (cash) tied up in their property.

What is the difference between equity release, a lifetime mortgage and home reversion?

Equity release is the generic term for accessing cash tied up in your home. There are two types of equity release, either a lifetime mortgage or a home reversion plan.

Lifetime mortgages are the most popular form of equity release. They are a form of mortgage that extends over your whole lifetime (not a fixed term like normal mortgages). In the past, there were no repayments with lifetime mortgages, with the loan and interest being repaid in full when your home is eventually sold (either when you die or go into full-time care). More recently, some lifetime mortgages allow repayments, enabling you to control the final balance that will be deducted from the eventual sale of your home.

With a home reversion plan you sell all or part of your property in return for a cash lump sum or a regular monthly income (or both). You receive a lifetime tenancy to remain in your property until you die or go into full-time care. There is usually no rent to pay and you carry on living in your home just like it is your own (you have to continue to maintain and insure it).

Is equity release right for me?

While equity release schemes can be a sensible and practical solution for financing lifestyle, home improvements, education or general income, it’s not the right solution for everybody. It can impact the amount of inheritance you leave for your family. It is a big step so it is important to seek expert advice.

However, if you are cash poor, but asset rich (with lots of money tied up in your home), equity release could be a good way for you to get your hands on some of your cash.

When can I get equity release?

You can only get equity release if you own your own home and you are over the age of 55 for lifetime mortgages and over 60 for home reversion plans.

How much equity release can I borrow?

The maximum percentage you can usually borrow is 60 per cent of the value of your property. How much you can take out will also depend on your age, the value of your property and if you have any past or present medical conditions, in which case some providers will offer larger sums.

What can I use equity release for?

You can use the cash you release from your property through an equity release scheme in virtually any way you want. The most common uses of equity release are:

• To repay an interest only mortgage left on the property or enable affordability of switching to capital repayments
• To fund the education of children or grandchildren
• Home improvements
• New car
• Family holidays
• Improved lifestyle
• Increased monthly income

How is equity release paid back?

Equity release is paid back from the sale of your property when either:

• the borrower dies (or on death of the second borrower if a joint lifetime mortgage)
• the borrower moves into permanent long-term care (or the second borrower moves into long term care if a joint lifetime mortgage)

Can equity release be used to pay for care?

If you are over 60 and a homeowner you can take out a lifetime mortgage on your existing property to pay for long-term care. For a home reversion plan you will need to be over 65 and own your own home. In all cases it is important to seek specialist financial advice to ascertain what is involved, and the options and alternatives available to you. Equity release may affect the benefits you are entitled to.

Should I speak to my family about equity release?

Equity release is a big decision and could have ramifications for future generations down the line, so it is a good idea to talk openly with family about your financial decisions.

Do I need financial advice?

Yes. To take out any type of equity release, you must speak to a suitably qualified financial adviser. John Whyte is a fully qualified and accredited independent financial adviser who specialises in equity release. Call now for a free, no obligation chat.