What is Equity Release?
Equity release is a product that lets homeowners aged 55 and over, take some of the money built up in their home, as a tax-free cash sum. There are two types of equity release, lifetime mortgages and home reversion plans.
If you have heard the term Equity Release and are unsure of what it means or you have been advised that this may be a solution to any financial problems you may have, you will find that it represents an opportunity to release cash (tax free) that is tied up with your property.
The fact that an Equity Release provides this benefit without having to move home or be forced into making additional interest payments means that it will appeal to a great number of people.
One easy way to think about an Equity Release is to consider it to be a “reverse mortgage” where you can take the money and a fixed interest rate is applied to it. The interest is then placed on top of how much is owed on the property and is only paid back in the long term.
Is this the right solution for me?
If you are thinking about obtaining an Equity Release, you should ask yourself a few questions.
Are you keen to benefit from the value that is currently locked up in your property? If you answer yes, ask yourself whether you have considered the alternatives to obtaining an equity release.
If these alternative options don’t sound too appealing, you will find that an Equity Release is far more palatable.
Some of these alternatives include:
- Downsizing your property and using the surplus funds
- Utilising savings, investments or other assets you may have
- Seeking help from family, obtaining grants or calling on state benefits which you haven’t claimed
- Take no action
Equity Release Calculator
As equity release differs massively on a case-by-case basis, it is vital to consider seeking professional advice when it comes to calculating your Equity Release loan.
Our experts can guide you and answer any questions you have about the products.
What is a lifetime mortgage?
A lifetime mortgage is a way to borrow money, as a loan secured against your home. It’s a type of equity release. The loan, plus interest, doesn’t have to be paid until the last borrower dies or moves out of the home into long-term care. Lifetime mortgages can be complicated, so to ensure you understand all the features and benefits, we won’t let you buy a lifetime mortgage until you’ve taken financial advice.
Is Equity Release safe?
It is fair to say that the Equity Release market is safer than it has been at any point and the Financial Conduct Authority, the FCA, provides a level of confidence to all participants. Anyone advising on Equity Releases must be specialists with qualifications in this field. There is further protection provided by the industry body, The Equity Release Council, who came into being in May of 2012. The Council is committed to protecting plan holders and promoting the reliable plans. The industry as a whole has welcomed the Code of Practice and some of the most prominent guarantees on offer include:
- The ability to stay in your home for a lengthy period
- The right to avoid negative equity, regardless of what happens in the property market
- The ability to obtain independent legal advice from a solicitor your choice.
The criteria required to obtain equity release
The amount of money that can be borrowed on an equity release will depend on the value of the property, with a minimum level and the age of the youngest borrower, the minimum age of the youngest borrower must be at least 55. Given that many providers do not have an upper age limit, this is an opportunity for people of all ages to benefit from this scheme.
Our brokers will ensure you find the solution that is best for your needs. It is important to weigh up what your options are, and this is where we provide you with a high level of service.
If Equity Release is not a suitable solution for your needs, you will be informed of why this is the case and what would be the best option for your needs.
How much equity can I release from my home?
With mortgages, the older you are the tougher affordability can become. Equity release works differently as your age can actually work in your favour. So the older you are, generally the more equity you can release. Medical conditions are viewed differently also and they can work in your favour. Typically the maximum you could be able to release will be around 50-55%.
What is a home reversion scheme?
Getting the best solution for you
Working with an independent expert will guarantee that you understand all the positives and negatives that can arise from an equity release plan. However, it isn’t an option that is right for everyone, which is why you should speak to an independent advisor who will examine your situation and provide you with the best solution for your needs. If an Equity Release plan isn’t right for you, you will be provided with an honest appraisal.
You will find that an Equity Release contains two essential guarantees:
The right to continue living in the property
The right to avoid negative equity
The second guarantee ensures that the amount which needs to be paid on death will never be greater than the property’s value and that there will never be a debt left to the beneficiaries of the estate.
Prospect Tree were excellent in guiding us through the lifetime mortgage process. Graeme Childs helped us through with great patience, providing advice in terms we could understand, to make the decisions we needed to make. The product we chose was arranged for us with the minimum of fuss. Thank you, Graeme and Prospect Tree
How does equity release work?
Equity release lets you borrow a tax-free cash sum from the money you’ve made on your home (equity). You can choose whether to make payments and the loan usually doesn’t have to be repaid until the last borrower dies or moves out of the home and into long-term care. Interest is charged on the loan plus any interest already added. This means the amount you owe will increase quickly over time.
Prospect Tree Mortgages is proud to be a member of the Equity Release Council. Over the course of almost 30 years, the Equity Release Council continues to represent the equity release sector and exists to promote high standards of conduct and practice in the provision of and advice on equity release which have consumer safeguards at its heart.
These standards and safeguards have allowed the sector to grow, giving financial advisers and their customers confidence in the products, dispelling myths about equity release, and educating the public about the potential to access the wealth in their home for a variety of uses.
Get in touch
Prospect Tree Mortgages, Acorn Barn, Wembdon Business Park, Smeeth, Ashford, Kent TN25 6SZ
Telephone – 0800 8620 840
Email – firstname.lastname@example.org
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A mortgage is a loan secured against your home or property. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. Click here to see our fee info. Think carefully before securing debts against your home or property. The financial conduct authority does not regulate most forms of buy to let mortgage. Prospect Tree Mortgages LTD is the appointed representative of TenetConnect Services Ltd, which is authorised and regulated by the Financial Conduct Authority. TenetConnect Services Ltd is entered on the Financial Services Register (www.fca.org.uk/register) under reference 150643. Prospect Tree Mortgages Ltd is registered in England and Wales under reference 10112043. Registered Office Address: Acorn Barn, Wembdon Business Park, Smeeth, Ashford, Kent, TN25 6SZ. The information contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.