Equity Release
What is equity release?
Equity Release is the term used to describe the process of using your main residence to provide either a one off lump sum or a regular income. Equity Release is normally only available to those aged 55 or over. There are 2 broad methods of releasing equity; via a Home Reversion Scheme or through a Lifetime Mortgage.
Home Reversion Scheme
Under a Home Reversion Scheme your property is sold but you retain the right to continue living there at a pre agreed rent which could be zero. Because you retain a right to continued residence, the amount you receive from the sale of your home will be significantly below the market value.
Lifetime Mortgage
Unlike a Home Reversion Scheme where your property is sold, under a lifetime mortgage a loan is secured against your property. Unlike a conventional mortgage, with a lifetime mortgage you have the option to add interest to the loan so that both capital and interest are repaid on death or one sale of the property.
The amount that you are able to borrow will depend upon the value of the property and the age of the youngest borrower. The older you are the more you are able to borrow.
Although once seen as a product of last resort, the wider benefits of equity release are gradually being appreciated. As well as being a means of supplementing income in retirement equity release can be used as part of a wider estate or retirement planning strategy.
Independent financial and legal advice should be sought when considering equity release. You may also wish to consider involving family members or beneficiaries in this process as equity release may affect the amount of inheritance you are able to leave them.
