Equity Release

Equity Release

Seek independent advice before unlocking the equity in your home.

Equity Release allows you to release a lump sum amount from the equity in your property. The money released can be used for a wide variety of purposes, i.e., from assisting children with a house purchase to supplementing your income in retirement. The scheme is only available for those over 55.

There are two types of equity release schemes: Lifetime Mortgage and Home Reversion Plan.

Lifetime Mortgage: This is where you take out a lump sum from your property. You make no monthly payments on the loan, with the interest payments rolled up into the loan over the term of the loan. The loan is repaid when the property is sold, i.e., when you pass away or when you move into a retirement home.

Home Reversion Plan: This is where you sell a portion or your entire home to a reversion company. You either receive a lump sum payment or regular instalment payments. Ownership of the property transfers to the reversion company, and in return you get to stay in your property rent free until you pass away.

In April 2014, the financial regulator introduced new mortgage rules (mortgage market review or MMR); as a result, mortgage lenders have tightened their lending criteria and anyone over 60 is finding it difficult to obtain a mortgage. Because of MMR, older borrowers are increasingly turning to equity release as a last resort, but opinion is divided. On the one hand, there is a view that they are expensive in comparison to conventional mortgages, whilst others state that they shouldn’t be compared to traditional mortgages at all, in that it’s a completely different product, catering for a niche clientèle in a market with no comparable products.

Without doubt, equity release is a complex, sensitive subject and requires expert advice from a specialist equity release adviser.

Before you proceed to unlock the cash in your home, we suggest you take a three step fact-finding approach:

See an independent whole of market mortgage broker to explore whether any of the niche lenders can offer you a mortgage.

If no luck, then proceed to an equity release specialist to see what options you have.

Do not commit to anything until your have made contact with an independent financial adviser who will be able to advice you on the best way forward.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

The Financial Conduct Authority does not regulate most types of buy to let mortgages, bridging loans, development loans and commercial loans.