What is Equity Release?

Equity Release plans allow you to release tax free cash from your home to boost your finances in retirement. Equity Release plans are available to UK homeowners over the age of 55 and there are 2 main types:

Lifetime Mortgages

A Lifetime Mortgage is a form of equity release plan in which a loan is secured against your property to provide you with a tax free lump sum of cash or regular income to spend as you wish, with no monthly repayments to make.

Interest is added to the value of the loan throughout your lifetime, normally accruing at a fixed rate. The loan plus interest is eventually paid back when the home is sold, usually when you move into long term case, or when you and your partner pass away. You can typically release between 15-50% of the value of your home, depending on your age.

A Drawdown Lifetime Mortgage is a special form of Lifetime Mortgage in which you agree a facility with the lender and take an initial amount to meet you immediate requirements and can then draw from the facility as and when you need additional funds in the future. As interest is only charged on the amount drawn down the roll up of interest is slower and therefore drawdown plans have become very popular and now represent over 50% of all equity release plans sold.

Home Reversion Plans

With a Home Reversion Plan you sell all or part of your home to a reversion plan company in exchange for a tax free lump sum and a guaranteed lifetime lease with no repayments to meet.

You stay in your home rent free for as long as you choose, however as it may be some time before the reversion plan provider can get their money back you will not receive the full market value of the proportion of the property you have sold.

As with Lifetime Mortgages the older you are the more money you will be able to release from your property with a Home Reversion Plan.

With both types of equity release it is possible for any entitlement to state benefits to be affected and your advisor should take this into account. You will also reduce the amount of your estate by releasing equity, however, it is possible with both Lifetime Mortgages and Home Reversion schemes to guarantee an inheritance for your beneficiaries.

Why do I need specialist advice?

Equity Release is a big decision that should not be taken lightly. It can affect your entitlement to state benefits and will reduce the value of your estate. In addition there are over 40 different plans available on the market with different interest rates and plan features, many of which are not available directly to the general public. It is vitally important therefore, that when making such an important decision you obtain specialist expert advice and choose the most appropriate plan from the whole of the market to meet your needs and circumstances. SAFER's members are true specialists and the most experienced advisers in the equity release industry. As a result they have access to all the plans in the market as well as exclusive plans from lenders that could save you thousands of pounds over the life of your plan.

For more information click through to our member's web sites by using the links below: