Unlocking the value of your home
Over recent years, equity release has become an extremely popular way of boosting and supplementing retirement income. As one of the more misunderstood products out there, Laura Healy, equity release adviser at Fairview Financial Ltd in Cheltenham, answer
What is equity release and how can it help me?
Equity release is a way of releasing the wealth tied up in your home if you are aged 55 or over, while continuing to live in your property. You can receive the money in one lump sum or smaller installments, tax-free and without having to make monthly repayments (unless you choose to do so).
The beauty of equity release is that it can be used for anything, including: home improvements, financial aid for children/grandchildren, clearing bothersome debts, or, simply toppingup your retirement income so you can enjoy holidays, a new car or other treats.
Equity release used to have a stigma attached to it. How has this changed over time?
In recent years, the equity release market has benefited from extensive product innovation. For example, inflexible plans have been phased-out and replaced with a wider range of relevant products to accommodate the ever-changing needs of retirees. It is now possible to repay interest and/or capital regularly, to protect your estate and future inheritances. The growth in the market has fuelled competition among lenders, resulting in lower interest rates and incentives such as free valuations and cashback, to help reduce initial costs.
What happens if I need to move into long-term care at a later date?
If you have an equity release plan and require long-term care, but you don’t have a partner entitled to live in the property, your home will be sold. Then, the amount borrowed, including interest, will be paid back to your equity release provider, without having to pay any early repayment charges.
You may also consider moving in with family who can look after you. If you think this may be a relevant issue in the future you must carefully check you proposed equity release provider’s specific terms - this is imperative, as some will only allow you to move in with family for medical purposes.
Can the amount owed ever exceed the value of my home? What if house prices fall?
Under all Equity Release Councilapproved schemes, there is a ‘no negative equity guarantee’, which means that your estate will never have to repay more than your property is worth, even if the total amount of the loan, plus interest, exceeds this amount.
Can I move to a new house with equity release?
In most cases you are able to transfer your equity release plan to a new home, as long as the provider is happy that the property you’re moving to offers enough security for the lending you require. Every lender has its own terms and conditions and these requirements are all covered during the initial ‘fact find’ phase. If you wish to move into a new house in the future, this will be taken into consideration with the provider and product recommended.
What qualities should I look for in an adviser?
It is a mandatory requirement of the Financial Conduct Authority that you speak with a qualified adviser. Also, a broker member of the Equity Release Council (like us) is recommended to ensure peace of mind that the products and services offered, conform to the best practices of the equity release sector.
There are countless equity release products available on the market today and a good advisor can save you thousands of pounds in the long-run by recommending the right product. It also helps to speak to someone qualified in both mortgages and equity release as there are occasions when a traditional mortgage could be more suited. We can look into all these different avenues for you, to ensure the best possible outcome.
Scrupulousness and the ability to listen are also essential qualities of an equity release adviser. This is a meticulous process that often requires several in-depth discussions and we recommend to all clients that they discuss their decision with their family, who can also be present at any appointments.