Equity Release

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More and more older people are turning to equity release mortgages to enable them to free up some of the value in their properties. And as the population continues to get older, this trend is certain to continue.

Thousands of older people are asset rich but cash poor. If you have a substantial amount of money tied up in your main asset that you r retirement, you could always sell up and buy a smaller property. But many older people would rather not sell the family home.

Equity release: a sensible solution?

Equity release can offer a sensible solution for the over 55s who want to supplement their income in retirement, fund home improvements, or simply pay for the holiday of a lifetime, for example.

Equity release has been around for a while, but many consumers have been wary about it in the past. Now, however, both lifetime mortgages and reversion schemes are regulated by the Financial Services Authority (FSA). Many equity release lenders are also members of trade body Safe Home Income Plans (SHIP).

Safe Home Income Plans

Safe Home Income Plans members have pledged to observe the SHIP code of practice, which guarantees the safety of all their products. You reserve the right always to live in your property until you die or have to go into a nursing home, and SHIP equity release also comes with a no-negative equity guarantee. This means that no matter what happens to property prices, your family or estate will never be left with a debt that cannot be repaid by the sale of your property, providing peace of mind for you and your family.

How does equity release work?

Equity release, now more commonly known as "lifetime mortgages"  can provide you with a regular income, or a cash lump sum. In return, you take out a loan which is paid off when the property is sold on your death. Some equity release providers allow you to pay monthly interest rather than this being added to your mortgage.  Lifetime mortgages give the guarantee that you can remain in your property for the rest of your life, or until you go into long term care.  This gives you complete security in your home.

Lifetime mortgages can be taken to release equity from your current home, clear your current mortgage, or to purchase a new home to live in.  The loan amount will be dependent on your age and the value of the property.

What are the benefits of equity release?
  • Can cut the inheritance tax bill faced by your estate
  • Allows you to free up cash
  • Increased competition means interest rates are falling
  • Enables you to stay in your own home
What are the risks of equity release?
  • A big commitment
  • Will reduce the inheritance you leave your family
  • Can impact on state benefits
How can Talk Money assist?

When arranging lifetime mortgages, every case is surprisingly different.  Some people have a good income and require a lump sum, wishing to pay the interest each month.  They may wish to limit any impact on their estate, and simply need an interest only mortgage which will continue for the rest of their lives.

Others may have limited income and would not be able to afford the monthly interest payments, their family may support them in utilising some of their equity for a more comfortable retirement.  The interest would be added to the loan each month; they would have the security of knowing they still own their property and can remain there for the rest of your life.

Claire Cook, director of Talk Money specialises in lifetime mortgage advice.  She offers a sympathetic approach and can advise on all aspects of arranging a lifetime mortgage.  We have access to the whole of the market in terms of equity release providers and can advise on the most appropriate lender for your needs.