Are you eligible for equity release?
Equity release is a way for homeowners to access the money that has built up in their homes as tax-free cash.
People who are at or approaching retirement who want to supplement their income, might consider it. But are you eligible for equity release?
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What is equity release?
There are two types of equity release, a lifetime mortgage and a home reversion plan.
A lifetime mortgage is the most popular and allows you to continue owning 100% of your home. This is a loan secured against your home which you can receive either as a lump sum or in smaller instalments.
With this type of plan any money released, plus accrued interest, is repaid upon death or moving into long-term care.
There is no commitment to make repayments, however, if the interest isn’t repaid it is added to the loan and the balance will increase each year.
A home reversion plan involves selling all or part of your home in exchange for a lump sum. You can continue to live in your home, typically rent-free, until you die or move into long-term care. At that point, your home is sold and you receive the proceeds from any share you still own, with the remainder going to the plan provider.
However, you won’t receive the full market value for the share of the property you choose to sell.
What are the eligibility criteria?
The criteria for equity release can vary depending on the provider and the specific product, which an adviser can take you through in more detail.
Firstly, you must own the home you wish to release equity from, and it must be worth at least £70,000.
The property must also be your main residence and based in the UK.
Not all property types qualify, but generally it must be in a good state of repair and be of standard construction.
Some non-standard constructions such as thatched roofs may require additional conditions and may not be acceptable to all lenders.
Age is another factor, and the youngest homeowner on the deeds must be at least 55 years old.
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Also, different providers may have additional specific criteria or conditions.
For example, some may have restrictions based on the location of the property or may not offer equity release on certain types of homes (like flats in high-rise buildings).
A conversation with an equity release adviser can help you find out if your property might be suitable.
How much could I access?
Factors such as the age of the youngest homeowner, your property value and your individual needs can affect how much you may be able to release, including whether it’s a single or joint application.
It’s also crucial when speaking to adviser that you have an idea of what you plan to use the money for, as it’s not advisable to release too much and end up paying unnecessary interest on the loan.
How you can enjoy spending the money is quite varied however, whether that’s on a holiday, home renovations, helping loved ones or supplementing your retirement finances. You must be aware that repaying any existing mortgage is a condition of equity release, but you can use the funds you release to do this.
Is equity release a good idea for you?
Equity release is a long-term financial commitment so it’s important to get the right advice.
Advice is required before proceeding with equity release and there may be other options which better suit your circumstances. A specialist adviser, such as those at Age Partnership Plus, can talk you through the different options to help you find out if it could be right for you.
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Equity release may involve a lifetime mortgage, secured against your property, or a home reversion plan. It will reduce the value of your estate and impact funding long-term care.
Any money you release, plus accrued interest, is repaid when you die or move into long-term care.
Initial advice is provided for free and without obligation. Only if your case completes would an advice fee of £1,995 be payable. Other lender and solicitor fees may apply.
The Radio Times equity release service is provided by Age Partnership Limited. Radio Times is a trading name of Immediate Media Company London Limited which is an Introducer Appointed Representative of Age Partnership Limited, 2200 Century Way, Thorpe Park, Leeds LS15 8ZB. Company registered in England and Wales No. 5265969. VAT registration number 162 9355 92. Age Partnership Limited is authorised and regulated by the Financial Conduct Authority. FCA registered number 425432 and is trading as Age Partnership Plus.