You’ve probably heard of it, but may be wondering what is equity release? Very simply, it’s a way to access some of the money tied up in the value of your home, whilst continuing to live in it until you die or move out permanently.
So, if you find yourself with equity in your home but limited cash to live as you’d like in your retirement, it’s a potential solution. The extra money it gives you could be used to live more comfortably, make home improvements, help children or grandchildren with a mortgage or university fees, it’s up to you - the money is yours to spend as you wish.
The equity in your home is simply the difference between the market value of your property and any outstanding mortgage or other debt secured on it.
Over recent years, property values in much of the UK have gone up significantly and many homeowners, particularly those who bought their property some time ago, could now find themselves with a decent amount of equity.
You can usually release somewhere between 20% and 50% of the equity in your home. The exact amount will depend on your age and personal circumstances.
Historically there were two main ways to release the equity tied up in your home without having to move.
• The Lifetime Mortgage
• The Home Reversion Mortgage
Recently there has been an evolution of the standard Lifetime Mortgage called the Retirement Interest Only (RIO) mortgage, which is basically an interest only mortgage with no end date.
You can either borrow money against the value of your house with a lifetime mortgage or RIO mortgage or receive cash in return for selling part or all of your home through a Home Reversion scheme.
To know which is right for you, it is advisable to consult with an Advisor who has experience and the necessary qualifications to advise against your individual needs.
This very much depends on your personal circumstances and also your needs and aspirations
You can be assured that today, not only are equity release schemes, providers and advisers regulated by the Financial Conduct Authority but the products themselves offer assurances to the customer.
Most providers are now members of the Equity Release Council and abide by its standards and principles. This includes a ‘no negative equity guarantee’, which makes it impossible to ever owe more than the value of your home and the freedom to transfer your scheme to another property without penalty. Always check the ERC register, to make sure the person or company you’re dealing with has signed up to this industry body’s code of practice.
As with any financial commitment related to your home, it is a big decision. As well as providing a roof over your head, it’s also a valuable asset and may form a significant part of your estate.
There’s a lot to consider, so it’s important to get professional advice from an Equity Release specialist and a solicitor before deciding if it’s the right option for you.
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