Equity Release - Is releasing cash from your home suitable for you?

Today, we are typically a cash poor but property rich society. Soaring values mean that for many people, your home is likely to be your biggest financial asset. It's often worth much more than any other investments or savings.

However, getting your hands on this cash to pay for renovations, long-term care or retirement is a major step. It requires selling your home, downsizing or releasing your cash in some other way. There are lots of things to consider.

First off you need to understand clearly what's involved. Releasing equity is simply the process of making the money in your home work for you, either by giving you a cash lump sum or a regular income. There are many options, depending on where you are in life. 

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Highly qualified 

Consulting a qualified mortgage adviser before making any concrete decisions is wise. Borrowing against or selling your home is a long-term financial commitment. One type of equity release is a lifetime mortgage, where every year interest is added to the amount you owe. This will reduce the remaining equity in your home. If you live a long time or house prices fall, there may be no equity left for your heirs to inherit. 

Our company appreciate the importance of giving careful guidance on this type of mortgage, and appropriate to this we are members of the Equity Release Council. The council and its member endorsement mark represent the gold standard for Lifetime Mortgages, Home Reversion Plans, and the Later Life Mortgage Market in general. 

Our qualified financial advisor has the required additional qualifications to advise on all types of products. Additional to this our advisor has also voluntarily completed the eight module syllabus from the London Institute of Banking & Finance’s Accredited Later Life Lending Programme, confirming his ‘Air Academy Professional Status’ .

Depending on your financial situation, we can help direct you towards the most appropriate option: 

• Helping you to consider the most appropriate way to generate cash or income.
• Highlighting the risks and real costs involved.
• Illustrating how the value of your estate will decrease. 
  
• Discussing the implications for your family on your death.

If you're thinking seriously about equity release, we may consider things you haven't. Why not talk through your ideas and concerns with us today? 

What is Equity Release?

Equity Release is a way of unlocking capital from your home. Equity release schemes essentially allow you to borrow money against the value of your home, with the debt being repaid from the sale proceeds after death. The two principal methods are Lifetime Mortgages and Home Reversion plans.

Points to consider:

• Minimum age usually 60 but can be as low as 55.
• You continue to live in your home for a long as you want.
• You receive a guaranteed tax-free lump sum, income for life or both.
• Provided the plan provider is a SHIP* member you have the freedom to move to a suitable property and without financial penalties, should you do so in the future.
• There are no repayments required until the home is sold. This is normally on death or entering long term care.
• As long as the scheme has a "no negative equity" guarantee your estate will not be liable for any debt beyond the property value.
• Providers will only accept applications from customers who have received advice from a professional, so there is value in being guided by our advisers who hold the appropriate qualifications.  

*SHIP (Safe Home Income Plans) formed in 1991 by the main provider to promote safe schemes and protection of plan holders. Companies complying with the Code of Practice use a logo in there printed literature which shows a ship, signifying the SHIP campaign. This has now been replaced by the Equity Release Council. For which Ward House Mortgages & Life are members. This is for the benefit of our clients so at to ensure quality guidance at all times. 

Lifetime Mortgages

Lifetime mortgages involve the taking out of a mortgage secured against the value of the home. There are no monthly repayments and interest is rolled up over the life of the loan and repaid upon leaving for long-term care or death, at which point the property is sold and the lender repaid. Interest can be fixed or capped. One aspect to consider is that the loan can increase as interest is added over time to greater than the value of the property, although The Equity Release Council's member schemes offer a no-negative-equity guarantee. Other things to bear in mind:

• A lifetime mortgage may work out more expensive in the long term than downsizing to a smaller property.

A lifetime mortgage involves borrowing against your home. There may be more suitable methods of raising the funds for your needs. To understand the features and risks, ask for a personalised illustration.

Home Reversion Schemes 

 In return for selling part or all of your property to the reversion company, you receive a tax free lump sum or you can opt for a lifetime income.

The home reversion provider then provides you with a lifetime lease, which guarantees residence in the property for the rest of your life.

By selling only a percentage of the property enables you to guarantee an inheritance for your beneficiaries.  You are still responsible for the maintenance of the property and the works involved.

A home reversion scheme involves borrowing against your home. There may be more suitable methods of raising the funds for your needs.

With a home reversion scheme you sell all or part of your property to a company and continue to live as a tenant rather than a full owner.  You are still responsible for the maintenance of the property and the works involved.

• On death the plan provider receives the full value of the part of the property you have sold.
• Schemes can offer a lump sum a "drawdown" facility a regular income or a combination of these options.
• Releasing equity from your home may affect your entitlement to state benefits and grants.

What will you have to pay us for this service

For Equity Release we confirm a maximum fee of £1,000 - any commission received by the lender is deducted, so if we receive £600.00 commission a fee payable by the client would be £400.00. If we receive commission of over £1000.00 there is no fee payable by our own client. This is only payable after completion of the required mortgage. 

Home reversion plans and lifetime mortgages are complex products.  To understand the features and risks, ask for a personalized illustration. 
Your Home may be repossessed if you do not keep up repayments on your mortgage.