Category: Equity Release

Making a huge life-changing financial decision such as equity release requires a lot of thought. Your decision to release equity from your property not only affects your life but the lives of your family too. It is important, then, to understand exactly how your equity release will change issues surrounding inheritance, the family home and your living situation as you get older.

Here we take a look at equity release, and how taking this financial decision can affect you and your family.

Involve your family in your decision

Of course, financial matters such as equity release are ultimately your decision to make – but that doesn’t mean that it needs to be a decision that you make alone. When you discuss your options with an independent financial advisor, they may recommend that you should talk through the possibilities with your family.

It may even be beneficial to have your family in meetings with your financial advisor to go over the range of options available. This not only helps you to get other perspectives on your decision, it can also help to avoid any shocks and surprises on your family’s part. It can also help that your family understands the whole process of the equity release.

Additionally, you may be surprised that your family may be able to provide or suggest alternatives to equity release, such as borrowing from them.

Your living situation

The family that you live with can also affect equity release. If you are married, in a civil partnership, or living with a partner, you will be eligible to take out a joint equity release plan (as long as you are eligible by age). A joint plan ensures that if one of you passes away or needs to go into long-term care, the other partner can still remain in the property.

If your partner is not in the plan and you pass away, the property would then have to be sold – unless the mortgage can be repaid in full. This would force your partner to find somewhere else to live.

Inheriting money

When considering equity release, it is common for individuals to wonder whether they can still leave an inheritance for their children and loved ones. The answer to this question is yes, but it should be noted that releasing equity from your property naturally decreases the value of your estate and the amount you have to leave.

You should speak to your advisor about the possibilities surrounding protecting elements of equity as an inheritance. Many leading equity release providers do have options that you could consider.

Releasing equity to help a family member

One very common reason that people release equity from their property is in order to financially help their family. A lot of money can be tied up in a property, and equity release can allow you to gift some of that money to your family – effectively a living inheritance.

There are many reasons that you might choose to do this, for example you might wish to pay for a grandchild’s education, or to help a family member with a deposit for their first home.

No need to sell the family home

It is also very common for individuals to not want to give up living in their family home. Your property can mean a lot more to you than simply a roof over your head – it’s where your family grew up. Equity release gives you the option to access some of the money that is tied up in your property, without you having to sell it.

If you are interested in speaking to an independent financial advisor please don’t hesitate to contact John Whyte today.

One of the main benefits of equity release is that you can withdraw money from the value of your home without having to leave it. If you’re happy with the size of your property and don’t wish to leave the area where you live currently (which is almost inevitable with downsizing), then this is a huge benefit. However, it tends to raise another important question; what if you want to move house?

The good news is that, yes, it is possible to move house after you’ve taken an equity release scheme. Whether you want to move closer to family or into a more manageable home, care facility, or simply decide later on that you would prefer to live somewhere else, most schemes will accommodate a relocation. Usually, the only requirement is that your new home offers adequate security for your equity release lender.

What does this mean?

This can have a variety of implications depending on your scheme and the property you’d like to move to. For example, if your new home is worth less than your current property, you will probably be required to pay back some of your loan early (which may incur early repayment charges). Alternatively, you may have to give your lender a higher percentage of your new home, to match the value of their initial loan.

There may also be restrictions about the type of property you can buy. You may not be able to move to a dedicated retirement apartment or a very unusual property, as this can affect the ability to eventually sell it on the open market. Lenders generally prefer conventional homes without factors affecting who can buy them once you pass away or move into long-term care.

How can I find the right scheme?

Before taking out any equity release plan, it’s important to speak to a professional advisor to help you understand if equity release is a good idea for you with consideration to how it might affect your finances and ability to move to a new house later down the line.

As a member of the Equity Release Council, I can guide you through your options to help you decide whether equity release is the right choice for you. Contact me today to arrange a free initial consultation to get started.

Previous posts have already covered two of the biggest questions people have about equity release: “Why do people choose equity release?”, and “what’s the best equity release scheme?”

However, given that equity release is a long-term financial decision, it’s understandable that people have many more questions and queries about how the equity release process works before choosing to proceed.

Every situation is different and will have its own unique considerations, but here are four of the most common questions that come up.

1 – Can anyone apply for equity release?

Equity release schemes will always have certain criteria that their applicants must meet. As a minimum, these usually include being at least 55 years of age and having the intention to take equity release from your main residence (not a second home, business or other investment property). Some schemes may offer specific arrangements if you are in poor health or are a smoker, for example.

2 – Can I stay in my home as long as I like?

Yes, equity release allows you to stay in your home for as long as you would like. Some lenders even allow for you to arrange in-home care if you become unwell, so you don’t even need to move into hospice accommodation if you don’t want to.

3 – What if I want to move to a new home in the future?

If you decide to leave your home, you can. Many equity release lenders will let you move to a new property, providing it meets certain eligibility requirements. However, if your new home is less expensive then you may have to pay back part of the outstanding loan. If you do not wish to transfer your equity release plan to your new home (perhaps you are moving in with family or into assisted living), you will have to fully repay the mortgage and may be subject to early repayment charges.

4 – Can my family end up inheriting debt?

In most cases, when someone passes away their debt will be paid off using any money or assets they leave behind and family members inherit whatever is left. However, there are equity release schemes that provide a “no negative equity” guarantee, meaning that, even if the sale of your home does not cover the outstanding loan, the scheme provider will not claim money from your other assets.

However, any equity release plan will impact the remaining value of your estate. It is always a good idea to take specialist advice about whether your will should be re-written to reflect this.

If you have any other questions about equity release, such as “why do people choose equity release?” or “what’s the best equity release scheme?” or “is equity release safe” have a read through our FAQ section of this site. Alternatively, feel free to contact me directly and we can discuss your situation and talk about my services in a little more detail.

“What’s the best equity release scheme?”

“Where can I get the best deal on a reverse mortgage?”

“Which provider will give me the best rates?”

As an Equity Release specialist, these are questions that I am asked very frequently (“reverse mortgage” being 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 on professional, impartial advice before signing up.

When is equity release a good idea?

Over the last decade or so, 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 account.

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 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 leave it.

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. Both options also 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.

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

Although it might not be for everyone, 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 on 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.

According to the Equity Release Council, more people than ever are choosing equity release as a way of unlocking funds that are tied up in their home. Why are so many homeowners opting for this way of managing their finances? In this blog, we’re going to look at some of the main motivators.

1 – Paying off an existing mortgage

If you have owned your home for many years, the changes are that you’ve built up significant equity as its value has steadily increased. Releasing some of this equity as cash can allow you to pay off your remaining mortgage, so that you no longer have to make monthly repayments and can enjoy a more comfortable retirement income.

Unlike downsizing, choosing equity release means that you retain ownership of your home and won’t have to leave (unless you eventually decide to go into long term care).

2 – Funding large purchases or holidays

Sometimes equity release is used as a way of financing a well-earned splurge, like a new car or hobby equipment. Now that you don’t have to worry about the weekly 9-5, wouldn’t it be nice to do something fun with the extra time on your hands?

Maybe you want to treat your family to something special? A lump sum from equity release could be used to pay for a wedding or a or a trip of a lifetime with the immediate family. It’s your money, so you decide if, and how, you’d like to share it.

3 – Home improvements

Most homeowners could tell you things about their home that they’d like to improve, if only they had the time or money. A large number of people opt for equity release in their later years so that they can finally make those changes.

Considering that equity release guarantees that you can keep your home for as long as you like, it makes sense to invest in home or garden improvements so that you can live more comfortably. You may also want to alterations that boost your home’s value, so that you achieve more money if you do decide to downsize or move into a care home in the future.

4 – Boosting overall income

By the time most of us reach our senior years, we’ve got various investments and pots of money to draw from. However, it’s not always easy to plan these in advance, and pensions may not always yield as much as you had hoped. Equity release offers a tax-free lump sum or draw-down scheme to give you a little extra room in your monthly income post-retirement.

5 – Gifts and planning

Some people choose equity release as a way of passing on part of their home’s value to their children, to reduce the inheritance tax due on the property when they pass away. This could take the form of a cash gift, or by using the released funds to pay for house deposit or outstanding debts.

If you’d like more information about whether equity release is right for you, what your options are and how it might affect your finances, please get in contact. As an Independent Financial Advisor, I offer impartial and regulated advice and can help you come to an informed decision about how to release some of the equity in your home.

Once the children have flown the nest or a larger home becomes too much to maintain, downsizing becomes a comfortable option for many people all over the UK. A common reason for this is to use the difference in property values to release money, often to assist with retirement funding or provide financial assistance to a family member.

However, downsizing isn’t always the best choice for some homeowners, especially with alternatives such as equity release available. Before you decide to sell your family home simply to release some of its value, consider these four questions.

1 – Are you ready to leave your home?

Moving somewhere new can often feel like a fresh start, but if you’ve lived in the same property for many years and raised your family there, leaving it behind can be difficult. Every room holds cherished memories, so it’s understandable that lots of people grow very attached to their homes.

If you’re sure that you’re ready for an exciting new chapter that’s great, but don’t feel forced to leave your property if you don’t want to. An equity release scheme would allow you to access some of the money tied up in your home without you having to leave it.

2 – Do you know where you would go?

Feeling happy about moving out is only half of the decision – you will also need to find somewhere that you would live next. This can be a big decision, particularly if you live alone. Relocating to a different part of the country may help you get more for your money, but you might miss the company and support of friends and family living nearby. Staying within a community will mean that if you have car problems or a health issue, you won’t feel stranded.

3 – Will downsizing actually balance the budget?

Depending on your current home and the type of property you’d like to move to, you may find that you are left with less capital than you had imagined. You should also factor in the costs of moving, like estate agents’ fees, conveyancing fees, the price of a survey, stamp duty and removals. Even once you’ve moved in, ongoing costs of living (like bills, management fees or ground rent) can all add up.

Have your home valued by an estate agent or surveyor and research the price of properties that you would be happy to move to, looking at their size, location and amenities. Compare the difference in house prices and the cost to work out whether a potentially-stressful move is worth it financially.

4 – When is small, too small?

You might be tempted to buy the smallest home you can find, focusing on how easy the housework will be and how little furniture you’ll need. This might be a disadvantage if you’re used to family and grandchildren coming to visit – never underestimate the value of a spare room! You will also need to get rid of a substantial amount of your belongings, which you might not be ready to do. By staying in your current property, you can hold onto all of your most treasured belongings and simply have a thorough de-clutter of all the items you don’t want.

If you decide that you’re not quite ready to move out of your home, an equity release scheme may be a good option to access some funds. Just like moving, equity release isn’t for everyone so if you want a free consultation to discuss your situation, please get in touch. You can find answers to commonly asked questions about how equity release works here.

Equity release allows homeowners to use the money they have invested in their home without having to move. Whether to cover a pension shortfall or to pay for a single, larger expense, using an equity release scheme is one way to make ends meet without having to leave your home.

There are two main types of equity release, with different benefits and drawbacks.

Lifetime mortgages

Lifetime mortgages involve borrowing a percentage of your home’s value, which gets paid back when you pass away or decide to sell your home. Most lifetime mortgages are offered with a fixed-rate interest that ‘rolls up’ over the duration of the loan. This means that debt can build quickly, although the Equity Release Council provides a guarantee that borrowers will never have to repay more than the value of their property.

Lifetime mortgage options include:

• Lump-sum loans. You borrow a lump sum, for which the interest compounds each year until you go into long-term care or pass away.
• Drawdowns. This option allows you to withdraw a smaller amount and draw down more money when you need it. Interest only accumulates on the money you’ve actually borrowed, which can make the overall cost lower.
• Interest repayments. Some lenders will allow you to make interest repayments over the duration of the loan, which can go some way to reduce the final repayment.

There are drawbacks to having a lifetime mortgage, such as losing means-tested benefits. Costs can also escalate quickly, meaning that you may end up leaving little of your property’s value to loved ones after you pass. Most lenders have strict eligibility criteria (such as a minimum age, and minimum loan amounts) which may mean that a lifetime mortgage is not the best option for your circumstances.

Home reversion

Home reversion schemes involve selling a proportion of your home to the lender at lower than market value. You won’t need to leave your home, but when you pass away or move into care, the lender will get the same proportion of the property’s sale price.

Compared to a lifetime mortgage, it can be more difficult to estimate the cost of home reversion, as it ultimately depends on the sale price of your property.

Home reversion schemes will also have stringent eligibility criteria, with schemes only available to those who are 65 or older. Younger borrowers are often required to sell a higher portion of their home, too. For example, some plans will demand 70% of your home’s value for only 20% in advance.

Which equity release scheme is better?

Choosing the most favourable scheme depends entirely on your circumstances, and you should always consult with a regulated, independent advisor before making a decision. If you would like a free initial consultation about equity release options, please get in touch. As a specialist equity release advisor, I can explain each type of equity release and how it relates to your situation, helping you to choose a plan that allows you to comfortably enjoy your retirement.

A quick look at the latest quarterly figures released by The Equity Release Council paints a convincing picture. Between July and September this year (Q3 2017), the over-55s withdrew £824 million of property wealth from their homes using equity release plans.

Compared to the same period last year (Q3 2016) when equity release lending totalled £572 million, this year’s figures represent a 44% increase year on year. In fact, it’s the highest amount for any single quarter since activity tracking began in 2002. The Equity Release Council is the industry body representing over 650 providers, financial advisers, solicitors and other industry professionals. It replaced the former Safe Home Income Plans (SHIP) in 2012.

New equity release plans up by 1/3

What’s more, the number of new equity release customers increased by just over 1/3 year on year for Quarter 3, with 9,905 new plans agreed. Another 6,849 existing customers used instalments to draw down funds, with an extra 1,138 obtaining further advances on their original plan. In total, the equity release sector saw activity from nearly 18,000 new or returning customers in Quarter 3 of this year.

Demand for drawdown products is rising

Around 3/4 of all new equity release products taken out were on a drawdown basis. Customers typically release smaller amounts of equity to start with, therefore reducing the build-up of interest over the duration of the plan. This also has the benefit of providing customers with the flexibility to unlock additional funds via future instalments as and when required.

The Chairman of the Equity Release Council, Nigel Waterson, said: “The combination of rigorous safeguards and flexible products in today’s market is one reason why housing wealth is now being used to support a wide range of financial goals. These range from boosting pension income and supporting retirement lifestyles to funding home improvements and adaptations, consolidating debts and providing a living inheritance to younger generations.”

If you’re a home owner wishing to release some of the equity tied up in your property, an experienced Mortgage and Equity Release Specialist, such as myself, can help you choose the right equity release plan. For further information or to arrange a free consultation, please get in touch.

An Equity Release scheme provides a tax-free sum of money, using the value of your current home. As long as you are a UK homeowner aged 55 or older, equity release can provide a lump sum or steady income to make your years of retirement more comfortable.

What does Equity Release involve?

There are two main types of equity release plan in the UK; a lifetime mortgage and a home reversion plan.

A lifetime mortgage plan is the most popular scheme, and allows you to retain complete ownership of your home. With a lifetime mortgage, you borrow a proportion of you property’s value, which will not have to be repaid until you sell your home, or in the event of your death. The interest for this mortgage is “rolled up” until the end of the loan, when it will be payable by your estate. To help you decide if a lifetime mortgage is right for you, we provide an obligation-free Equity Release Calculator.

Home reversion schemes involve selling a percentage of your home in exchange for a lump sum. You can remain in your home rent free for as long as you need, and the loan is repaid when the house is sold.

What are the benefits of Equity Release?

The main benefit of Equity Release is that you can access money tied up in your home, without having to move out or make any repayments during your lifetime. The nature of an equity release scheme also means that the amount of inheritance tax to be paid by your estate is often reduced, and the NNEG (no negative equity guarantee) protects your loan in the event of a market downturn.

Using an equity release scheme to unlock cash is a simple way to provide income for the rest of your life, however it’s important to keep in mind that it will impact the value of your estate, and can also affect any means-tested benefits you are currently entitled to.

The equity release market is fully regulated by the Financial Conduct Authority (FCA), and your options should be fully explained to you before you sign up to any equity release plan.