Releasing Equity

Releasing equity from your property could well be the way forward if you find yourself in the position of being “asset risk and cash poor”. Equity release is generally available to those over the age of 50 and who have significant equity within their property.

Essentially, you are releasing the equity tied up in your property, the capital from which is then used to provide you with an income or, in some cases, a lump sum.

Equity release can take one of two forms, either:-

A lifetime mortgage secured on your property. You can choose to make mortgage repayments or defer these until such a time as the property is sold, in which case interest on the mortgage is rolled up.
Home reversion plan. This is where a proportion of your home is sold to a third-part, normally a home reversion company and when the property is sold, a proportion of the proceeds are payable to the home reversion company.

In both instances, you retain the right to live in your home.

Each route has its advantages and disadvantages and is not suitable for everyone. Indeed, it can significantly reduce the value of your estate for inheritance purposes.

It is vital that independent advice is sought when considering any type of equity release scheme. In addition to this, many companies offering equity release schemes support the Safe Home Income Plan (SHIP) scheme where members abide by certain standards to ensure that all the facts are explained to you and that you are fully aware of the implications that releasing equity from your property may have.

Lifetime mortgages as from October 2004 are regulated by the Financial Services Authority. A lifetime mortgage is a loan secured on your home. The loan and interest are normally repaid from the proceeds of the sale of your home when you die or move into long term care. With a home reversion plan you sell all or part of your home for cash. However you do not get the full market return for doing so.

The above equity release mortgage detail is for information purposes only as does not constitute financial advice under the Financial Services and Markets Act 2000. When considering any type of equity release product, it is important that you seek independent legal advice.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.