FIVE FACTS ON EQUITY RELEASE
After recent figures from the Equity Release Council revealed lending in the third quarter of this year was at a record high, we look at some of the key points to consider before deciding whether using property wealth is the right retirement finance solution for you. FACT 1 Equity release is available to those aged between 55 and 95, who own a property worth at least £60,000, and allows homeowners to release money tied up in their property to help boost their retirement finances.
The tax-free cash lump can be spent however you choose, and the amount of money you can release will depend on various factors such as your age and the value of your property.
As long as you take a plan that is approved by industry standards body the Equity Release Council (ERC), you will never owe more than the value of your home.
You can still qualify for equity release even if you have an existing mortgage, although you will need to pay this off with the released funds.
There are plans available that allow you to pay the interest on a monthly basis, keeping the overall cost down.
There are also others that protect a portion of your property’s value, which can then be passed down as inheritance.
Equity release will reduce the value of your home and may affect your entitlement to means tested benefits as you have increased your income by freeing up property wealth.
Because of this, it’s always a good idea to seek independent advice, and your adviser will actively encourage you to involve your family in the decision-making process, as it will affect their future inheritance.
You can use equity release to pay off an interest-only mortgage – an increasingly popular solution to what is becoming a significant problem.
The Financial Conduct Authority have warned of an increased number of repossessions because borrowers are getting caught out when their interest-only mortgage terms come to an end and they don’t have sufficient funds to repay it.
With an estimated 3.3million UK homeowners with this type of loan, equity release is being seen as one of the most attractive solutions to the problem for the over-55s.