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What is Equity Release?

Equity release is a special type of mortgage meant for people who are 55 or older and own a home. It lets you use some of the money (equity) that has built up in your home over the years. We have a simple calculator to give you an idea of how much you could borrow.

Pension Income

• You borrow against the value of your home while retaining ownership.

•The borrowed amount, plus interest, is typically repaid when you pass away or move into long-term care.

•The interest can either be paid regularly or added to the loan amount

Home Reversion Plans

• You borrow against the value of your home while retaining ownership.

•The borrowed amount, plus interest, is typically repaid when you pass away or move into long-term care.

•The interest can either be paid regularly or added to the loan amount

Equity release can provide a source of income in retirement, but it's a significant financial decision with potential long-term implications. It's important to seek professional advice before considering equity release to understand its impact on your financial situation, inheritance, and eligibility for means-tested benefit

More Information that may you need to know

How does equity release work?
What is a lifetime mortgage?
Navigating Financial Freedom
Considerations for Equity Release
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How does equity release work?

Equity release is a way for homeowners, especially those who have owned their property for a long time, to tap into the increased value of their home. As your property value goes up and your mortgage decreases, the difference is called 'equity.' You can access this money through an equity release plan, with the most common type being a lifetime mortgage.
Unlike traditional mortgages, equity release, including lifetime mortgages, is simpler. Lenders mainly consider the age of the youngest homeowner, your location, and your property's value to decide how much they can lend you. They don't dwell on your income, expenses, or credit history, making the process quicker.
One thing to keep in mind is that choosing equity release may impact the value of your estate left for your loved ones. Monthly repayments aren't required, but if you don't make them, the interest on your plan will grow over time. For instance, if you borrow £100,000 at 4% interest, after 18 years, the amount to repay could double to £202,581.
However, there are ways to manage the interest effectively, and it's essential to consider that your property's value may continue to rise.

What is a lifetime mortgage?

A lifetime mortgage is a common type of equity release plan, essentially a loan secured against your home. While it typically lasts for the homeowner's lifetime, it now comes with fixed-term early repayment options, allowing you to repay it without charge at a later date.

With a lifetime mortgage, your property remains entirely yours. Unlike traditional mortgages, you generally don't need to make monthly repayments. These plans provide flexibility:
  • You can make voluntary repayments to control the balance.
  • Opt for an interest-only plan with monthly repayments.
  • Features such as fixed-term early repayment charges, Inheritance Protection Guarantee, and drawdown options offer customization.

On the other hand, a home reversion plan differs from a lifetime mortgage. In this arrangement, a provider buys a percentage (or all) of your property at less than market value, providing you with a tax-free lump sum. You retain a lifetime tenancy, living rent-free. When you pass away or move into long-term care, the house is sold, and the proceeds are divided between the provider and your beneficiaries.

While this might seem complex, our friendly advisers are here to explain everything in clear and understandable language.

Financial Freedom

At Equity Release Supermarket, we empower you to decide how to use your money without any restrictions. Whether you dream of a new kitchen, a holiday getaway, or helping your children onto the property ladder, the choice of how you spend your tax-free cash is entirely yours. You have the flexibility to receive your money as a lump sum or in smaller, more manageable chunks, providing you with the utmost flexibility.

Flexibility

One of the primary reasons people opt for an equity release plan is the remarkable flexibility it offers. For instance, with a lifetime mortgage, the purpose for which you use your funds is entirely at your discretion.
Choosing a drawdown equity release scheme allows you to access your money as needed, rather than taking it all at once. Additionally, you have the flexibility to minimize long-term interest by releasing less equity less frequently. If your financial situation permits, you can even make regular or one-off capital repayments.
Furthermore, our equity release plans come with a variety of flexible features, allowing you to customize a plan that caters to your current and future needs.

No Need to Downsize

Equity release eliminates the need to undergo the stress, inconvenience, and cost of moving to a smaller property. It not only provides financial freedom but, more importantly, freedom of choice.

No Negative Equity Guarantee

All the equity release schemes we recommend come with a no-negative-equity guarantee. In practical terms, if, when your plan is repaid, your house is worth less than the amount you owe, your loved ones won't be required to repay the difference to the lender, ensuring they are never out of pocket.

The Disadvantages

‘Roll Up’ or Compound Interest
Many people opt not to make interest repayments during their plan's life, leading to the accrual of 'rolled-up' or compounded interest included in the final repayment. The longer the plan runs, the higher the amount of interest to be repaid. To minimize this, withdrawing equity in smaller chunks over time or making regular or one-off capital repayments can be effective.
At Equity Release Supermarket, our local advisers provide honest and responsible advice, ensuring awareness of potential pitfalls. If equity release isn't the right fit and you have other financial options, we'll advise accordingly.

Early Repayment Charges

While lifetime mortgages used to carry hefty early repayment charges, they now feature fixed-term charges, aligning with the structure of fixed-rate residential mortgages. The shortest fixed-term charges last for 8 years, offering flexibility as plans can be fully repaid without charge after this period.

Reduced Inheritance

Equity release reduces the value of your estate, impacting the inheritance for your loved ones. However, safeguarding a portion of your property with a guaranteed inheritance plan is possible. Discuss any inheritance tax implications with your Equity Release Supermarket adviser if this is important to you.

Making Informed Decisions for Your Financial Future

When exploring which equity release scheme suits you best, it's crucial to evaluate your personal circumstances and individual needs.

Equity release applications are only accepted following advice from an authorised and qualified equity release adviser. All our advisers are proud members of the Equity Release Council, committed to providing impartial, quality advice from the entire market without any pressure.

This approach ensures that you can take your time to make a decision, whether in the comfort of your home, over the phone, or via video—whatever suits you best. We strongly recommend discussing the matter of releasing equity with your family, and they are welcome to join any meetings for added support and clarity.
Notice

Key Benefits of Equity Release

  1. Cash Access: Unlock funds from your home for various needs.
  2. Flexibility: Use the money as you wish, from home improvements to retirement income.
  3. Tax-Free: Enjoy tax-free proceeds from equity release.
  4. No Monthly Repayments: Relief from monthly payment obligations.
  5. Property Ownership: Retain full ownership with a lifetime mortgage.
  6. Customizable Plans: Tailor the plan with features like voluntary repayments.
  7. No Negative Equity Guarantee: Loved ones won't repay shortfalls with reputable plans.
  8. Freedom from Downsizing: Maintain your current lifestyle without moving.
  9. Council Standards: Adherence to Equity Release Council standards ensures quality advice.
  10. Family Involvement: Encouraged to involve family for support and understanding.

Notice

Awareness Matters

  1. Accruing Interest: Compound interest may accumulate without regular repayments.
  2. Reduced Inheritance: Equity release could impact the inheritance for your loved ones.
  3. Early Repayment Charges: Though more flexible, charges may apply if repaid before the fixed term ends.
  4. Benefits Impact: Eligibility for means-tested benefits may be affected.
  5. Long-Term Commitment: Equity release plans are designed for the long term, with potential charges for early repayment.
  6. Family Involvement: While beneficial, involving family may introduce complexities.
  7. Consider Alternatives: Explore alternative financial options before committing to equity release.