With improved life expectancy and changes in the lifestyle, many individuals, especially above the age of 55, have started adopting equity release schemes to help them in a period of distress post their retirement. This is probably due to insufficient savings and at the same time pressing the need for maintaining a higher standard of living.
As we are aware, Equity release allows generating cash from your property which can be drawn either in the form of a tax-free lump sum or by generating smaller installments. And with the help of equity release scheme, you can spend the cash wherever required depending upon your existing needs. Be it funding for education for children or travelling needs, you can utilize the amount drawn anywhere as per your requirements.
Typically, equity release is a scheme which is meant for senior citizens and since it has been started not long back there are few misrepresentations on these schemes due to lack of knowledge & awareness amongst the customers.
The schemes were introduced to secure individuals financially after retirement. In equity release the required cash comes from either mortgaging or selling a proportion of your home, the latter is also known as home reversion, while at the same time retaining the right to live there as long as you want.
The mortgage version is a Lifetime Mortgage and the home reversion option means that the ownership of your home is split between you and the home reversion company.
Using Home reversion calculator, or Lifetime mortgage calculator you can calculate the amount you can draw from the property you own.
There are few facts behind Equity release, some of them are highlighted as below:
- For equity release, you receive a tax-free cash lump sum or installments
- No monthly repayments are required.
- You can spend the money the way you like and wherever you want.
- Release equity from house and stay in your house as long as you want.
To fully understand how Equity release works, you need to speak to the experts in detail and get a personalized solution. It is important to ensure the scheme you avail from the provider is an authorized one. Consider the following while opting for one-
- Get clarity about the schemes.
- A “no negative equity” guarantee
- The right to retain your home for life
How much can be borrowed?
It would be interesting to note, that the amount that you can release is based on your age and value of the property. It also depends on product providers, depending on property value, age, location and many more.
Some more interesting info about lifetime mortgage is:
- With Lifetime Mortgage, you can generate as little as £10,000 tax-free. You can leave more funds in your reserve and can utilize it whenever you need it. Your property will remain your own.
- With the help of optional repayments of up to 10% per year, you can pay back some of the money you have borrowed back to your property.
- If you choose not to pay any interest then it can be simply added to the total amount and can be paid when you eventually plan to sell the property.
- It will be interesting to note that the interest rate is not fluctuating. It remains fixed so you can be assured that you are being charged for.
- You will never owe more than the value of the property/house and the best part is that you will never pass any debt to your children.
- If you want to move to a new property in a new location and you don’t want to repay the money, you can easily have it transferred to another owner.
- Own your home, like with any other mortgage.
- The regulatory body which recommends you to take this plan will have to be regulated by a government body called the Financial Conduct Authority,
Some more facts related to Equity Release are:
- You have to be aged 55 or more.
- You should be the owner of the property in the UK and should have a minimum value of £70,000 or more.
- The inheritance you leave for your family significantly gets reduced
- It will be a lifetime financial commitment and not meant to be used as a short term solution. If you wish to repay the loan, early repayment charges may apply.
- Any existing mortgage has to be fully repaid as a part of the exercise.
- The scheme terminates upon the death or entering care.
Some of the most common queries of our clients are:
- If any tax is charged?
Tax is not charged on the money you receive via an equity release scheme. For instance, if you invest equity release money in a deposit account for further income then tax is charged.
- Who is qualified for equity release?
In the initial stages, the property is surveyed for eligibility. The minimum value for eligibility is £70,000. If you have a property that is worth less than this amount then it cannot be mortgaged.
For eligibility of an individual, you need to be of at least 55 years of age to qualify for a lifetime mortgage scheme & the minimum age of 65 is required for a home reversion scheme.
- Impact it will have on my family?
A “no negative equity guarantee,” is offered by all the equity release schemes which mean that, no matter what happens to the housing market, customers will never owe more than the value of their home.
- What happens to the partner if I die?
If your plan is held in joint names, then your partner will be authorized to live in the property under the same terms.
It is better for senior citizens and every retired individual could potentially take advantage. You can opt for equity release even if you are financially stable as this investment can be utilized for leisure activities or to enjoy your retirement.
The latest industry trends have highlighted that “equity release” lending has been running high and has become quite popular. The scheme has been around for some time but has evolved exponentially over the years. However, these schemes can also prove to be a very expensive way of borrowing, particularly if you live a long time. That’s because the way they work means you end up paying interest on interest. The total owed amount can quite easily get tripled.
Important things to consider-
- Check if you have explored all other options such as using your savings?
- What effect will an equity release scheme have on any state benefits you receive?
- Check if there are any tax implications of taking out an equity release plan?
- Discuss with a qualified independent financial adviser (IFA) specializing in equity release to find the best scheme for you.
If you are curious to know more about the amount you can get released from your property. Then you can use an equity release calculator which will give you the information in detail.
You can also contact us on 07368 432 992 and speak to our experts for detailed information to discuss your needs.
At Equity release calculator we allow you to freely analyze how much equity you can release from your property. Our Equity loan calculator is free and we also help you connect with our team of experts who can truly guide you in this process depending upon your circumstances and real-time situations.
We are the best equity release calculator in the UK and we help you find the best solution to meet your needs! We will thoroughly guide you through the process of how you can avail the scheme as well as the benefits you can draw. Be assured as we will be transparent in all our communications while making you understand about the schemes and the underlying benefits.