Equity Release
Equity Release is a financial product designed for UK homeowners aged 55 or over. It allows access to some of the value tied up in a residential property as tax-free cash, without needing to move. In simple terms, it’s a way to monetise part of a home’s value in later life.
In Summary:
- Available to UK home owners aged 55 to 95.
- UK residents only, minimum home value £70,000.
- The amount of money that can be raised increases with age, from around 25% at age 55 up to a maximum of around 55% of a home's value.
- Money raised is tax free and can be used for any legitimate purpose, including repaying a mortgage, paying off debts, paying for home improvements, gifting family members etc.
- Two main types of Equity Release schemes are available via our Equity Release provider, lifetime mortgages and home reversionary schemes. The scheme most suitable for clients depends on individual circumstances, our FCA approved partner guides clients through the pros and cons of each type of scheme and will make recommendations based on indiivdual circumstances.
- Lifetime mortgages are available for homeowners 55 or over with a minimum house value of £70,000. A first charge security is required, meaning any exisiting mortgage requires to be repaid via the proceeds of the equity released. Compound interest accrues, no repayments are needed, however products provide the flexibility of making interest repayments if required to mitigate against reducing interest building up. Money can be accessed in two different ways, via either a single lump sum or via a drawdown plan. With single lump sum plans the entire amount being released is taken via a single initial payment, with interest building up on the full amount from day one. Drawdown plans involve an initial release of some of the equity to be released, and further phased releases when needed, with interest only payable on the equity released to date. In both plans the loan is repaid when the property is ultimately sold, typically when the last surviving owner dies or goes into long term care. Clients taking out lifetime mortgages are protected by no negative equity guarantees.
- Home reversion schemes are available to homeowners aged 65 or over and A home reversion plan involves the sale of all or part of a home to a reversion company for lower than market value. The home reversion provider takes legal ownership of the property, but the current owners remain as beneficial owners of the home with a guaranteed lifetime lease. There's no interest to pay on the money released and no monthly payments to make. The home reversion plan comes to an end typically when the last remaining applicant passes away or moves into long term care. The home reversion provider then takes its percentage share of the sale proceeds.