You are here: Home -

Back to basics: a guide to equity release

0
Written by: YourMoney.com
18/10/2016
More and more older people are turning to equity release mortgages to enable them to free up some of the value in their properties. Here we detail the basics.

Equity release

More and more older people are turning to equity release mortgages to enable them to free up some of the value in their properties. And as the population continues to get older, this trend is certain to continue. Thousands of older people are asset rich but cash poor. If you have a substantial amount of money tied up in your main asset that you want to get your hands on, you could always sell up and buy a smaller home. But many older people would rather not sell the family home.

Equity release: a sensible solution?

Equity release can offer a sensible solution for the over 55s who want to supplement their income in retirement, fund home improvements, or simply pay for the holiday of a lifetime, for example. Equity release has been around for a while, but many consumers have been wary about it in the past. Now, however, both lifetime mortgages and reversion schemes are regulated by the Financial Conduct Authority (FCA). Many equity release lenders are also members of trade body The Equity Release Council (ERC).

The Equity Release Council (ERC) 

ERC members have pledged to observe the ERC code of practice, which guarantees the safety of all their products. You reserve the right always to live in your property until you die or have to go into a nursing home, and ERC equity release also comes with a no-negative equity guarantee.

This means that no matter what happens to property prices, your family or estate will never be left with a debt that cannot be repaid by the sale of your property, providing peace of mind for you and your family.

How equity release works

Equity release can provide you with a regular income, or a cash lump sum. In return, you take out a loan which is paid off when the property is sold on your death. Or you can choose to sell a proportion of your home in return for the money.

The first type of equity release mortgage is known as a lifetime mortgage, while the second is called a reversion scheme.

Pros and cons of equity release

Allows you to free up cash.

Increased competition means interest rates are falling.

Enables you to stay in your own home.

Can cut the inheritance tax bill faced by your estate.

A big commitment.

Will reduce the inheritance you leave your family.

Can impact on State benefits.

 

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

After an award-winning health insurance provider?

Winner of best online health care provider in the YourMoney.com Awards 2015

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

Guide to valuations and surveys

Do you need a vanilla valuation or a survey with a fringe on top? Martyn Stones explains the different types o...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
self-employed
Self-employed earnings lower than 20 years ago

The average earnings of the self-employed in Britain are lower than they were 20 years ago, according to a study.

Close