What is Equity Release?
Equity Release is a way to free up the equity which you may have in your current property. An equity release lender will be willing to lend you a proportion of the value of your property either via a lump sum or regular payments. You will only need to repay the mortgage following the sale of your home when you pass away or if you move into long-term care. Although you can make monthly repayments there is no obligation to do so.
Is Equity Release right for me?
This will depend on your individual circumstances and there can be a number of reasons why you may wish to proceed with equity release. It could be that you need money to do or have something and unfortunately don’t have access to any other cash. You may wish to release equity to improve accessibility in your current home, pay off an existing mortgage, to release funds to provide for your future retirement needs or to provide gifts to your children or grandchildren.
What types of Equity Release Plans are there?
Lifetime Mortgages – With a lifetime mortgage you retain ownership of your property and can continue to live in it until you pass away or move into long-term care. Subject to lender terms you may be able to move the mortgage to a new property in the future should you wish to. You can choose to take a larger initial lump sum or smaller sums on an ad-hoc basis. Should you wisht o you can choose to make payments to service the monthly interest but you are not obligated to do so.
Home Reversion Plans – With a Home Reversion Plan the lender will take ownership of a proportion of your property and you will not have control over the property. You can live in your home rent free but you must insure the property and ensure the property remains in a good state of repair. The lender will sell the property after you die or move into long-term care.
Equity Release Myths:
Equity Release has had a bad reputation in the past. However, it is important to note that Equity Release products are now highly regulated following changes in the law and this has been done to help protect homeowners?
Myth 1 – Equity Release isn’t safe:
At PAB Wealth Management our Equity Release Advisors only work with lenders who adhere to the standards set out by the Equity Release Council. Our Equity Release advisors and the lenders we work with are all authorised by the Financial Conduct Authority.
Myth 2 – My property will end up in negative equity and my family will have to pay:
Our Equity Release Advisors only offer advice on products which provide a no negative equity guarantee meaning that you will never owe more than the value of your property.
Myth 3 – There will be nothing left to pass down to my children:
Dependent on the amount of borrowing you wish to take you may be eligible to benefit from ‘Inheritance Protection’ whereby a proportion of your property is not included in the loan and will be passed to your estate in the future.
Myth 4 – I won’t be able to move home in the future:
You can potentially move home and transfer your mortgage to a new property in the future subject to your lenders terms and conditions.
Myth 5 – Interest rates are high:
Although interest rates are slightly higher than for a standard residential mortgage they are much lower than they used to be. In addition often the interest rate will be fixed for the whole length of the mortgage which could be as long as 30 or even 40 years. Your equity release advisor will help guide you through which product is the best for your needs.
Is Releasing Equity the right thing to do?
The most important thing for you to consider is if you wish to pass on any inheritance in the future. If you have any children or grandchildren this is an important part of the decision. If you have no intention of leaving any inheritance then equity release could be the right lending for you.
You will also need to consider your age and current income and if another type of property loan would be right for you. Your equity release advisor will help you to decide if equity release is the right thing for you to do.
What is the equity release process?
We always recommend an initial discussion(either face to face or virtually) to help you understand the implications around equity release. Where possible we encourage your family members to be present as well to ensure they are part of the process and any questions or concerns they may have can be answered. By having this initial discussion during our fact-finding your equity release advisor can ensure you receive the best possible advice based on our knowledge and experience.
We will provide you with our recommendation and help to ensure that the process is as smooth as possible. You will need to take legal advice before you release equity from your home.
Your home/property may be repossessed if you do not keep up repayments on your mortgage