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Download the FSA's brochure on Equity Release
here:
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Equity Release - general information
First a word of advice:
Equity Release is the generic term given
to all forms of financial plan which generate cash lump sums or income
from one's property. The two main types are Lifetime Mortgages* and
Reversion Plans. Both types of plan are regulated by the Financial Services Authority.
Any such plan is of great
financial significance to the home-owner and we feel it is essential you
are advised by a properly qualified Independent Financial Adviser.
The products most IFAs recommend are approved
by SHIP (Safe Home Income Plans). This is an organisation who set
industry-wide standards and codes of conduct for these types of scheme.
For more about SHIP click here.
If you are interested in Equity Release we consider it essential you
receive advice from an independent financial adviser.
Please contact us using the details on this site.
The equity release
products may involve lifetime mortgages or home reversion plans. If so,
to understand their features and risks, ask for a personalised
illustration.
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Page
Index:
For Lifetime Mortgages: CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR
SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN DOUBT, SEEK
INDEPENDENT FINANCIAL ADVICE.
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What is it and how does it work?
There are two main types of plan,
Reversion Plans and Lifetime Mortgage Plans. Each typically gives a
guarantee that you may continue to live in your home for the rest of your
life, or until you leave your home permanently to go into care.
A
Lifetime Mortgage Plan* is a loan, secured on the
property. You may take the loan by way of a lump sum, a regular income, or
a combination of the two. The amount you can borrow depends on your age:
the older you are the more you can borrow. You make no repayments until
after death or quitting the property to enter long term care. In almost
all cases the lender issues a "no negative equity" guarantee,
which means whatever happens, you / your estate can never owe more than the
value of the property.
A Reversion Plan involves the sale of part or all of
your property to the reversion company in exchange for a lump sum. Most
plans require you to be at least 65 years of age (some reversion plans require you to be aged over 70).
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It is important to remember that Equity Release plans may
be used to generate regular
(e.g. monthly) income as well as lump sums. However, not all lenders offer this income facility. Note: It is important to consider
the effect of an equity release plan, and the funds accessed thereby, on
any State benefits to which you may be entitled. This is particularly
important if such benefits are means tested, so it is vital to seek
professional advice from a qualified adviser. For example, there may be
other State benefits you may be entitled to claim, which might mean that
an equity release plan is not suitable for you.
Why do people
consider Equity Release?
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Provide additional income |
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Raise capital |
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Holiday home purchase |
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Reduce IHT (inheritance tax) |
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Fund long term care |
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Provide lifetime gifts to relatives, for example giving a grandchild
a help onto the property ladder. |
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Pay for a dream holiday |
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Purchase luxury goods or anything else - there is no restriction on
how you use the funds. |
"Significantly, many people have realised that Equity Release means that they don't have
to sell the home they love, in order to maintain their standard of
living."
Finally, it is most important that you
discuss the idea of equity release with your family, especially if you are
thinking of leaving an inheritance behind when you eventually die. One of
the drawbacks of using a Lifetime Mortgage plan is that over time the
accumulated interest will reduce the value of your estate when the property
is eventually sold. This can significantly reduce the amount of money you
end up leaving to your family.
Examples:
The examples linked below show two
uses of Equity Release:
Example A: - Need for cash and additional
income
Example B: - Planning for
Inheritance tax ("IHT") Mitigation
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We always recommend
independent advice on this important financial issue.
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Click on the Ruby for a no-cost, no-obligation call-back
from
a qualified Equity Release independent financial adviser |
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