Are you over the age of 55, strapped for cash to help you check out those boxes on your ‘places to visit list’, but you still own property?
Well, as per statistics conducted by several financial companies, the most straightforward solution is to take out an equity release plan.
In fact, according to some of UK’s largest equity release firms, the market hit an unbelievable record in 2018, after the seventh year of growth, with retired homeowners withdrawing over 3 billion of estate wealth the previous year via some 30,000 plans.
However, even with the massive growth, some retirees are still struggling with finances. It doesn’t also help, bearing in mind that there are some conflicting reports about equity release products, making this hugely significant financial resolution even more complex and intricate – at a time when it’s vital to make the right choice for your situation.
So, if you need unbiased information on what is equity release, be sure to check out this comprehensive guide and also use this online equity release calculator.
What’s Equity Release?
Equity release is basically a range of products that let you access the equity (cash) locked in your property if you’re aged 55+. You can take the capital you release as a lump sum or, in several smaller amounts (drawdowns) or as a combination of both.
Types of Equity Release Products
There are two primary forms of equity release plans:
#01. Lifetime Mortgages
It is the most popular type since it has some of the best options, especially if you don’t have any heirs.
The plan allows you to choose whether to take out your funds in a single lump sum or a series of small amounts within a specified period up to the maximum limit settled on with the plan provider.
If you do have a family, don’t worry because it also caters to your needs. It offers you the option of keeping some of the value of your residential property as an inheritance for your family. It means you’ve got the advantage of enjoying releasing equity while also making sure your children have something reserved for the future.
#02. Home Reversion Plan
In this equity release plan, you can access all or part of the value of your estate while retaining your right to reside in it, rent-free.
Your lender will buy all or a part percentage of your estate. So you’ll know precisely what portion of your residence you have parted with and, in the same way, what has been ring-fenced for the future (what you can leave in a Will).
The percentage you maintain in your manor will always remain the same regardless of any fluctuations in property values unless you choose to take any additional cash releases. So, with the home reversion plan, when you’ve reached the end of the disposition, your manor is put up on sale, and the sale proceeds are shared according to the residual proportions of ownership.
The Benefits of Taking out Equity Release
The equity release market has, and it continually keeps on growing, and here are some reasons why most retirees are opting to take it out rather than the traditional residential mortgages:
- You can receive a tax-free lump sum and a series of small, regular payments to complement your income, and can continue living in your home until you die or move out permanently
- You may relocate or move to a suitable alternative residence in the future, as equity release is transferable. It will be subject to your new house being up to standard with the property suitability criteria applicable at the time
- With the lifetime mortgage plan, you have the right to continue living in and keeping ownership of your estate
- You’re guaranteed returns. You can get the money depending on the value of your property and the arrangement you have with your lender and not worry about how you will pay it back
After looking into all the perks of equity release and you’re thinking of taking a plan out, you MUST ensure that you seek financial advice from an independent financial adviser. The adviser is required by the law to have a specialist qualification, and he/she can recommend the scheme most suited to your needs.
However, it would help if you were vigilant so that you get your money’s worth. So check that:
- They’re on the Financial Conduct Authority register (you should search by the firm’s name)
- They’re on the Equity Release Council member directory
Make a smart decision today, get your best equity release plan, and enjoy every moment of your golden age in class and style!