|1) What is equity release?
2) What can equity release be used for?
3) What should I bear in mind before taking out an equity release scheme?
4) What is a lifetime mortgage?
5) What is a home reversion scheme?
6) Why is my life expectancy so important?
7) Will I have something to leave behind for my heirs?
8) Is equity release safe?
9) Should I take professional advice?
|1) What is equity release?|
|Equity release is becoming an important part of retirement planning – it can be used to make your retirement more comfortable, and to open up exciting new possibilities. Equity release providers are regulated by the Financial Conduct Authority (FCA) – which offers considerable security to homeowners.|
|An equity release scheme lets you raise money from your property – as either a lump sum or regular income, or both – and at the same time gives you, and a partner, the right to remain living there until you both die or move out.|
|There are two types of equity release scheme available in the market, with several variations on each. The lifetime mortgage involves taking out a new loan secured on your home, and the home reversion involves selling all or part of the ownership of your home. In return both types will pay you a lump sum and/or an income.|
|2) What can equity release be used for?|
|All kinds of things. It can be used to:
|3) What should I bear in mind before taking out an equity release scheme?|
|Before you decide to take things further, you should bear some things in mind. For example, there might be ways to maximise your income without taking out a new financial product. Or there might be other, more appropriate, ways to raise money than equity release.|
|That’s why you must get impartial, specialist advice before doing anything.|
|4) What is a lifetime mortgage?|
|With a lifetime mortgage, you take out a new loan secured on your property. You do not make repayments of capital nor, with most schemes, do you make payments of interest, instead, interest is rolled-up to be paid when the scheme is ended. With some schemes you can choose at the outset to make monthly interest payments to reduce the impact of rolling-up or compounding of interest. You continue to own and live in your home. After you and your partner have died or moved into long-term care, your house is sold and the amount you borrowed, including rolled-up interest, is paid to the lender. Anything left over, after costs, passes to your, or your partner’s, estate.|
|5) What is a home reversion scheme?|
|With a home reversion, you sell all or part of your home, but you continue to live in your home. After you and your partner have died, your house is sold and the proceeds are split between the home reversion provider and your, or your partner’s, estate.|
|6) Why is my life expectancy so important?|
|The choice between a lifetime mortgage and a home reversion depends a lot on how much longer you’re expected to live in your property. It will influence your financial adviser’s advice on which product is right for you. Generally, the older you are when you take out a product, the larger the sum you can raise.|
|7) Will I have something to leave behind for my heirs?|
|A lot will depend on the value of your property and how much money you wish to raise. But you should be able to make sure you’ll have something to leave behind to your heirs. Schemes entered into from Equity Release Council Members all carry a ‘no negative equity’ guarantee which means that you will certainly not leave your heirs with any debt connected to your equity release scheme. This is one of the points your financial adviser will be able to address.|
|8) Is equity release safe?|
|Yes, the government protects homeowners by regulating the equity release providers through the Financial Conduct Authority (FCA). Taking impartial, specialist advice beforehand means you can be confident that equity release is right for you, and that your equity release plan can meet your needs.|
|Your adviser (who is also regulated by the Financial Conduct Authority (FCA)), will explain the risks of any product he recommends to you. They will also make sure you can’t end up with negative equity (that means owing more money than your house is worth).|
|9) Should I take professional advice?|
|As with all financial planning options, there are pros and cons to think about, which will be different for each person. So you shouldn’t enter into an equity release scheme without impartial, specialist financial advice and legal advice. Above all talk to your family.|