Equity release is a way of accessing a portion of the cash, or equity, you have in your home, to supplement income or to meet a capital requirement.
Equity release is essentially a loan secured against your home; an option for those who are asset rich but cash poor and require additional income or capital in retirement. Equity release differs from a traditional mortgage, as you borrow money against the value of your home, but pay nothing back until your home is sold – either on your death or if you go into care.
The most common method is to release equity from your property via a Lifetime Mortgage, as a secured loan. You do not need to make repayments; instead interest is ‘rolled up’ to be repaid when the house is sold. You continue to own your home, so any growth in the value will be available to your beneficiaries.
The minimum age for equity release is generally 55 and the maximum you can borrow against the value of the property is normally 60%, with the amount you can receive being based on your (and your partner’s) age and health. The amount you can borrow will generally be more favourable the older you are and if you have a medical condition.
The costs of equity release are normally higher than a traditional mortgage and will impact on the value of your estate available to your beneficiaries, so it is important that you consider this as a final option, once you have considered and ruled out all other possible solutions.
As with a standard mortgage, there are a number of providers offering a variety of interest rates, loan to values, charging structures and levels of flexibility. It is therefore essential to take independent financial advice from a qualified adviser to help you decide whether equity release is a suitable option and if so, which provider best meets your specific requirements.