Releasing equity from your home

If you are a homeowner aged 55 or over, you may be able to release some of the money tied up in the value of your home through equity release. This is a way of using the value that you hold in your property by turning some of it into a cash lump sum. Generally, you can take the money released as a lump sum, several smaller amounts on which you will pay interest, or a combination of both.

What is equity release?

Property values in the UK have gone up significantly over recent years. Homeowners might be in a position where there is a significant difference between the market value of their home and the outstanding debt secured against it. Equity release provides the homeowner with access to the property’s value so that they can utilise those funds in other ways, perhaps to make up for a pension shortfall. You might be able to use the wealth you have accumulated in your property without having to move house. This is complicated, and needs to be tied in with other areas of financial advice.

Limitations on how the money is used

You can use the equity you release from your property however you wish. You may want to supplement your pension, fund home improvements or even gift money to your children or grandchildren. What is important is whether equity release is the right financial strategy to achieve your overall objectives. Your adviser will also look at the impacts that equity release would then have on other areas of your finances.

How does equity release work?

There are two main types of an equity release plan: lifetime mortgages and home reversion schemes. Lifetime mortgages allow you to borrow money against the value of your home. Home reversion schemes are where you receive a lump sum in return for selling part or all of your home. Lifetime mortgages are the most popular type of equity release because you continue to own the property and don’t have any monthly payments to make. The loan is repaid with interest when the house is sold, usually when you die or go into care. Any money left over will go to your beneficiaries. With a home reversion scheme, you give up ownership of your home and then live in it rent-free in exchange for an income. When you die, the home will be sold and your beneficiaries will get whatever is left after the equity release lender has taken their share.

Our equity release specialist qualifications

Equity release is regulated and a financial adviser is required to hold a professional qualification to advise in this area. Unividual have an in-house equity release specialist, Greg Harris. Like all our financial planners, Greg advises clients on every area of their finances so if you think equity release may form some part of your financial plan then Greg will be the best person for you to get in touch with.

 

Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.

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