Equity Release | Lifetime Mortgages
If you are in your mid-50s or older, own your own home and want additional funds, then releasing some of the equity in your property might be a way of achieving this.
Your home is probably your most valuable asset, so you may like to see if you could benefit from some of the value which may have built up in your ‘bricks and mortar’.
But if you do not wish to sell up and move out of your home, remortgage or release funds from other sources, Equity Release plans may allow you to access funds tied up in your home and most schemes also guarantee your right to live in your home for the rest of your life.
An ‘Equity Release’ scheme is designed to use the ‘equity’ in your home to give you a lump sum, an income, or a mixture of both. There are many reasons why you might wish to consider releasing equity from your home:-
• Would the security of an extra income mean that you could stop worrying about money all the time and really enjoy your retirement?
• Do you have plans to spend an extra lump sum? Perhaps on the home, a replacement car or on better holidays?
• Do you need additional income in retirement?
• Would additional money help you make arrangements in advance so that you will get the personal care you would like, should you ever need it in future?
These are just some examples of reasons why people consider using their home as a means of generating further income in retirement. We can help you decide whether this type of plan is suitable for you.
Many retired people who manage on a small pension and limited savings live in properties that, even with recent house price falls, have soared in value since purchase.
The average house price in England and Wales was £168,814 in September 2008 (Source: www.landreg.gov.uk/houseprices). A 40% release of equity at this value could provide, for example an annuity of £5,200 per annum. (Source:http://www.fsa.gov.uk/tables/ - based on male aged 65, non-smoker, no guarantee, level annuity.)
There are various types of equity release schemes available. The schemes themselves are quite straightforward and relatively simple to understand. What is not quite so straightforward is the impact these can have on your future finances and the effect on your family. Age Concern and the Financial Services Authority both recommend getting financial advice before proceeding.
We will look at your overall finances to see if equity release is really the best option for you and, if so, help you find the right type of scheme – bearing in mind that in some cases you could risk losing state benefits and may have to pay extra tax. So, when deciding what is right for you, we will help you think through the consequences of your decisions and consider alternative arrangements that might better suit your needs and wants.
Features of Equity Release Plans
• Money released from the value of your principle residence is free of tax, although if the cash is then invested there may be tax to pay on any income or growth.
• They can give a lump sum, a regular income or both. The lump sum could be tens of thousands of pounds; the income boost will depend on the type of investment and your age and health.
• You don’t have to move house or sell your home to unlock equity. With reputable equity release schemes there is a rock-solid guarantee that you will be able to continue to live in and enjoy your home until the day you die– and in many cases still be able to leave something of the property’s value to your family.
• Releasing equity, spending it or making the right kind of gift or investment can also be a way of cutting inheritance tax bills. Inheritance tax kicks in at 40% on everything of your estate value over £325,000 (2010/2011) including the value of your home.
Equity release will not suit everyone. It is always worth considering whether funds could be raised affordably from other sources before going down this route.
