What is Equity Release?
If you are over 55 years old, equity release products allow you to release cash from your property, without monthly repayments.
You can either have the money as a lump sum, or you can have smaller, incremental payments (or both). The amount you can release will be based on your specific age, health, location and the value of your house.
After you’ve retired, you may find that much of your finances are tied up in your property so equity release, can be a great way to access additional finances.
How Do I Release Equity from My Home?
The predominant way of releasing equity from your home is a lifetime mortgage, which is a loan that is borrowed against your home’s value. Lifetime mortgages are then paid back once the property is sold (this is normally either when you move into long term care or pass away).
The other less common form of equity release is a home reversion plan, which is a way of selling part, or all your home at under the market value. You then receive a tax-free lump sum and live in the property rent free for the remainder of your life.
What Are the Costs Associated with Equity Release?
The main costs include the valuation of your property, independent financial advice, arrangement charges and insurance.
Equity release does accrue interest, but this is paid off either on the sale of the property, or after the borrower has passed away.
You don’t have any tax to pay on equity release because it is money borrowed against your property.
What Are the Advantages of Equity Release?
Equity release plans can be a great way to access extra cash, whilst remaining in your own home. There are some great benefits, including:
- You will never owe over the value of your property (no negative equity).
- The sum is tax-free.
- The money won’t impact your family’s inheritance and can reduce inheritance tax.
- You don’t need to pay the money back until you either go into long term care or pass away.
- The equity release products are authorised and regulated by the Financial Conduct Authority.
What Considerations Should Be Made with Equity Release?
Like many financial products, it is worth considering the potential drawbacks of equity release as it won’t be right for everyone.
- Compared to a more standard mortgage, equity release may not be as cost effective, and can come with higher interest rates.
- If you release a lump sum early on in retirement, it may not leave you with enough money later on.
- If you wish to move after using an equity release scheme, you might need to pay off a portion of your mortgage, so you have enough equity to buy your new home.
- If you aren’t in good health and die soon after you start the scheme, the costs can appear quite high.
Equity Release Sussex
For further information on an Equity Release in Sussex, contact an independent equity release broker at Transparent Mortgage Services today. Our team will look at the market and find the best equity release product and provide guidance and equity release advice for your needs.