EQUITY RELEASE

RELEAsING EQUITY FROM YOUR HOME

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Equity Release schemes are designed for older homeowners who have already paid off their mortgage or have a very small mortgage outstanding. These homeowners may be short of disposable income but, due to rising house prices over the years, find themselves owning a highly valuable property.

Equity Release schemes are designed to unlock some or all of this equity and turn it into a tax-free lump sum or regular payments, or in some cases, a mixture of both.

To be eligible for equity release you must be 55 or over with a UK property worth at least £70,000. Minimum age, property value and property criteria vary between providers

In summary, Equity release allows you to get hold of some of the value of your home without having to move out or downsize. You can take the money you release as a lump sum, in several smaller amounts or as a combination of both.

Types of equity release:

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lifetime mortgages

A lifetime mortgage enables you to release a tax-free cash lump sum from the value of your home. You will continue to own your home completely and retain the right to live in it for the rest of your life.

You can choose to repay the interest each month or make no monthly payments and roll up the interest into the loan amount. The amount borrowed plus accrued interest is usually repaid from the proceeds of the sale of your property when you die or move permanently into long-term care.

Take out a loan that is secured on your home, usually between 20 and 50 per cent. The older you are the higher percentage you will be eligible to borrow.
Continue to own your own home, although you will have to pay back the mortgage on it;
Repay the mortgage from the proceeds of the sale of your home when you die, or if you move out of it (perhaps into a care home).

The majority of Lifetime Mortgages also come with a ‘no negative equity’ guarantee. This means that if you live longer than expected, or even if house prices go down, the amount owed will never exceed the open market value of your home when it comes to be sold.

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home reversion plans

A home reversion plan involves selling part or all of your home to a home reversion provider. You receive the sale proceeds as cash, which can be paid as regular instalments or as a single lump sum.

On any home reversion plan that is recommended, you retain the right to stay in your property rent-free for the rest of your life. You will receive less than the full market value of your home, because the buyer cannot re-sell the property until you die or move permanently into long-term care.

Sell all or part of your home to a reversion company;
No longer own your own home, but continue to live there as a tenant of the reversion company;
The home is sold when you die, or if you move out of it (perhaps into a care home).

A Home Reversion plan is a sale and not a loan; therefore there is no interest to pay. Instead, the Home Reversion provider will pay less for the relevant proportion of your home than it would be worth on the open market. Typically you will receive between 35% and 60% of its market value depending on your age. So, for instance, if you sold 50% of a £200,000 property you could receive between £35,000 and £60,000 rather than £100,000.

what would you do with your money?

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make improvements to your home

buy a new car

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gift a loved one

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All lenders on our equity release panel are members of the Equity Release Council. The Equity Release Council is the industry body for the equity release sector and was born from an expansion of the remit of SHIP (formerly Safe Home Equity Plans).

A major focus of the Equity Release Council’s work is to ensure that products are safe and accessible for consumers. Each member of the Council that provides equity release products is signed up to the Equity Release Council’s Code of Conduct which puts in place a number of safeguards and guarantees for consumers.

This means that people who use equity release products offered by Equity Release Council members can have confidence in the products they use and the information they receive. On top of this all members also abide by the overarching principles of the Council.

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Redditch Mortgage Advice is proud to be part of Linear Financial Solutions.

Linear Financial Solutions

Redditch Mortgage Advice is a trading name of McTernan Financial Ltd, who act as a mortgage and protection broker for Linear Financial Solutions which is a trading name of Linear Mortgage Network Ltd, registered in England at 2nd Floor, Gateway 2, Holgate Park Drive, York, YO26 4GB, number 05198588.

Linear Mortgage Network Ltd trading as www.linearfs.com as an Appointed Representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading name of Advance Mortgage Funding Limited which is authorised and regulated by the Financial Conduct Authority for mortgages, protection insurance and general insurance products.

The guidance and/or advice contained in this website is subject to the UK regulatory regime and is therefore restricted to consumers based in the UK.