When is the right time to consider equity release?
IAM OFTEN asked: “is taking equity from my home or my buy-to-let property right for me?” The simple answer is that as everyone has different needs, wants and circumstances, a bespoke approach must be taken. With correct advice, you can make an informed decision. An equity release loan* is a loan secured on your home or buy-to-let property that does not, in most circumstances, require you to make monthly payments on the interest or capital. This moneycanbeusedtohelpwithincome, to help support family members, to pay off an interest-only mortgage, to renovate your home, to purchase a property, in short, for anything you want.
In these financially uncertain times, it may be the right moment to release some equity from your home or to at least take some advice to help see if this is the right course of action for you.
How much can I borrow?
It depends on your age. A loan is available from age 55 to 95. The percentage of the value in your property known as “loan to value” (LTV) will range from about 20 per cent up to 55 per cent.
What will the interest rate be?
At the moment, as interest rates are low, the interest rate charged will range from around 2.33 per cent to 6.5 per cent. This depends on the amount of money you take from your property.
Can I move home?
Yes, you can move home, downsize or upsize: the loans are portable, as long as the property is acceptable to the lender.
Will I leave an inheritance to my family?
Yes, there are inheritance guarantees and this will be built into the advice process. You will maintain ownership of your property and any equity that is built up in the property after the loan is repaid remains in your estate. Equity release is a useful financial planning tool in retirement, as by unlocking capital from your estate you are also reducing your inheritance tax liability.
When is the loan repaid?
The loan must be repaid if the borrowers enter residential care or if all parties have died. However, should one wish to repay part of, or the entire loan at any time, this is also possible but there may be penalties for early repayment.
Do I have to pay fees?
Most lenders do not charge a valuation fee and most do not charge an administration fee, however you will need to pay legal fees and, in some cases, an adviser fee.
Everyone has different needs, so take a bespoke approach’
So, to revisit the original question, “is taking equity from my home or my buy-to-let property right for me?”, while this may not have a standardised or straightforward response, it is clear it is an opportunity that deserves to be explored — but it is important for you to receive professional advice.
Elliot Simberg is an IFA and equity release specialist with Vintage Wealth Management, which is authorised and regulated by the FCA and a member of the Equity Release Council. He offers initial consultation without obligation, commitment or fee, meeting in any way you feel comfortable, under current government guidelines.
*This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.