If you are over 55, releasing capital from your home in the form of equity release could be a potential option. This is a big decision and requires careful consideration and expert advice.
Equity release can be used to provide a ‘cash injection’ by releasing money from your home without having to move or sell your house. The funds can be used for various purposes (and not limited to):
- Clearing debts including outstanding mortgage balances
- Gifting money to friends or family
- Topping up your retirement income
- Home improvements
- Funding long term care
- Mobility equipment
- Providing a cash lump sum for dream holidays and other aspirational goals
There are two options for equity release:
Home reversion is when you sell all or part of your home to a reversion provider (and therefore give up ownership) in return for a lump sum or regular payment.
You can normally raise between 20% and 60% of the market value of your home (or the part you sell) and you will have the right to remain in your property for life or until you need to move to long-term care.
The minimum age that you can consider a home reversion plan is 60, however some providers insist that you are at least 65 before you can apply.
At the end of the plan your property is sold, and the sale proceeds are shared according to the remaining proportions of ownership.
Paterson Financial Planning do not facilitate advice on Home Reversion Plans.
Most equity release contracts are in the form of a lifetime mortgage. This is a mortgage secured on your property, while you still retain ownership.
The minimum age at which you can take out a lifetime mortgage is 55 and you can normally borrow up to 60% of the value of your property. The amount that is available for release is dependent on your age, and the percentage available will typically increase with age.
You can choose to access the full amount that is available for release through an immediate lump sum, or alternatively you can set up an equity release drawdown to provide access to funds if & when required without the need to set up a new plan.
If you can afford to make regular monthly interest payments, this will preserve the remaining equity in your home to be passed onto your beneficiaries, alternatively you can choose to roll the interest payments up with no monthly repayments.
The debt is only payable when the property is sold (note that the rolled-up interest will reduce the amount of remaining equity in your home with the potential of no remaining equity to be passed onto your beneficiaries). Equity release council approved plans have a ‘no negative equity guarantee’ meaning that there would never be a debt left to your estate if the outstanding rolled up interest + original loan amount equated to a higher value than your home.
We can guide you through the potential benefits and highlight what the pitfalls may be for your own individual circumstances and help to determine if this option is right for you.
The purpose of this website is to provide technical and generic guidance and should not be interpreted as personal recommendation or advice.