Myths vs facts – the truth about unlocking cash from your home
Britain’s retired homeowners are sitting on £1tn worth of property, and a number of families now aim to unlock that wealth to enjoy a comfortable retirement.
In a survey of UK adults retiring in 2020, almost a third plan to use property to supplement their income. This isn’t surprising when you consider the sums involved. Key’s Pensioner Property Index shows that the property wealth owned by over-65s in Britain amounts to £1.133tn. This wealth isn’t standing still, either, with retired homeowners seeing their property prices increased by an average of £7,216 between November 2018 and November 2019, despite a year of political uncertainty.
Over the past ten years, the value of British homes has soared, with retired homeowners seeing the value of their properties rise by an average of 44 per cent.
Retired homeowners are curious about how to use this money to pay for a more comfortable life, clear existing debts, redecorate or travel the world. Some aim to downsize to a smaller property and over half of those retiring in 2020 would consider equity release.
But some people still have reservations about equity release, believing outdated myths about what it means for families and property. Here, our experts have busted some of the most persistent myths about equity release.
MYTH: I will lose ownership of my home
FACT:
You will always remain the owner of your home with a lifetime mortgage, the most popular type of equity release. A lifetime mortgage allows homeowners aged 55 and over to release tax-free cash from their home. There are typically no monthly repayments as the loan plus roll-up interest is repaid after death or entry into long-term care, usually from the proceeds of the sale of the home. You should always think carefully before securing a loan against your home.
MYTH: I can’t leave an inheritance
FACT:
You can. Some of the plans offered by Key include the option to ring-fence a percentage of your home’s future value, which is protected and can be passed on to your family; this is known as inheritance protection. Once the lifetime mortgage is repaid, any money left over will go to your estate.
MYTH: It isn’t safe
FACT:
Key’s advisers are fully qualified equity release specialists. They will look at your situation and work out if equity release is right for you. If it isn’t, they’ll tell you. Their advisers always act in your interest, ensuring you consider alternatives such as downsizing. Key are members of the Equity Release Council and are regulated by the Financial Conduct Authority, which exists to protect consumers. Your property will be valued by an independent RICS-registered surveyor, so you can be sure you will get an accurate valuation of your property.
MYTH: I could pass debt on to my children
FACT:
It is not possible for homeowners to pass debt on to their children with any Key Equity Release product. No matter how long you live,
you will not pass on debt to your children. All Key Equity Release plans come with a no negative equity guarantee, which means you will never owe more than your home is worth. Equity release will reduce the value of your ESTATE AND MAY AffECT your entitlement to MEANS-TESTED BENEfiTS.
MYTH: I have a mortgage, so equity release isn’t right for me
FACT:
Many customers use equity release to repay an existing mortgage balance – and Key Equity Release’s advisers are used to dealing with customers with existing mortgages. When you apply for equity release, you don’t need to be mortgage-free, but a condition of the loan is that you repay outstanding debts secured against your home.
MYTH: The interest rates are very high
FACT:
Interest rates are the lowest in years. Key Equity Release customers can now access annual interest rates from as low as 2.58 per cent fixed for life. Most Key Equity Release customers have received a fixed annual interest rate of 3.79 per cent or lower. The overall cost for comparison is 3.97 per cent APR*. *All stated rates correct as of March 6, 2020. Interest rate received and plan features are subject to eligibility. Ask for a personal illustration.