Equity release enables you to access the equity (cash) tied up in your home. To calculate the equity in your home, deduct any mortgages or secured loans from its current value.
Traditionally, equity has been passed down through the generations as inheritance, however there is an increasing trend among those aged 55 and over to release some of the equity in their homes during their retirement. This enables them to fully enjoy their lives with fewer financial constraints.
The cost of living is continuously increasing, and healthcare improvements ensure that people are also living longer. In addition, pensions are less reliable than they were previously, all of which cumulate to mean that it is harder to retire and feel financially secure.
If you have concerns about how changes in your income will impact your lifestyle, then Equity Release could be the option for you. Of course, there is the obvious solution of simply selling your property and downsizing, but for many people, the stress of buying and selling, moving home and bidding farewell to fond memories and a community in which you may have lived for years can be too much.
Equity Release would enable you to remain in YOUR home and with YOUR memories.
To be eligible for Equity Release you must fulfil the following criteria:
- Over 55 years of age
- Your home is worth at least £70,000
- Tax free
- Make home improvements
- Repay unsecured debts (credit cards, loans)
- Gift money to family, perhaps for a house deposit, wedding or holiday
*You should always think carefully before securing a loan against your property
Lump Sum Lifetime Mortgage
A lifetime mortgage allows you to retain ownership of your home (your main residential property) and access the equity within it by securing a mortgage on it.
The amount you can mortgage for is usually around 60% of the value of your home, depending upon its value as well as your age, health and lifestyle.
The mortgage, and any accrued interest, is simply paid back upon the passing of you and your partner, or alternatively if you or your partner move into long-term care. Unless fixed, the interest is variable and subject to an upper cap limit.
You will not usually have to make any monthly repayments during your lifetime. The mortgage interest simply ‘rolls up’, which means that the unpaid interest is added to the mortgage loan figure.
If you choose to, some lifetime mortgage products will allow you to make interest and even capital payments, which will mean a lower mortgage to be repaid upon your death. This ultimately leaves more inheritance for your family if you have ringfenced a percentage of the home’s value for this purpose.
Some lifetime mortgage products will allow you to access the equity in regular, smaller sums, rather than one large lump sum, which means that you will only pay interest on the amounts you have withdrawn.
Drawdown Lifetime Mortgage
Drawdown lifetime mortgages work in the same way as lump sum lifetime mortgages, however offer greater flexibility.
Once you know the maximum amount of money you can access via your lifetime mortgage, you can choose an initial amount to ‘draw down’ and then leave the remaining cash so that you can draw it down in incremental stages as required in the future. Interest is only added to the amounts you draw down. This form of Equity Release is very flexible and can be a useful way of planning your finances and replacing regular income.
A Home Reversion Plan is where you sell part, or all, of your home to a Home Reversion Provider in return for either a lump sum or regular payments. You retain the absolute right to live in your home on a rent-free basis until you pass away, but you do need to agree to maintain and insure your home. With Home Reversion Plans, you do not normally receive full market value for the percentage you sell due to the fact that you retain an absolute right to remain in the property and both you and the Provider will share any increase in the property’s value.
As with a Lifetime Mortgage, you are still able to ringfence a particular percentage of your property for inheritance. At the end of the plan, when you pass away, the property is sold, and the sale proceeds are distributed according to who owns the remaining percentages.
Renew Advice currently does not offer Home Reversion Plans.
If you need to move into a smaller property in the future, you will usually be able to pay the loan back (without a penalty) 5 years or more after taking out your lifetime mortgage, subject to the terms of your lender. You may even be able to take the loan to your new home. This flexibility gives you reassurance that, if your needs change in the future and you need to move, you still can.
You do have the flexibility to make voluntary repayments (up to 15%) of the amount you have borrowed each year. Choosing to make voluntary payments will reduce the size of the debt interest that is being charged and means a smaller amount of interest will be accrued each month.
Electing to release equity from your home does not mean you sacrifice your family’s inheritance. You can ringfence a percentage of your property’s value with a protected lifetime mortgage. This guarantees that a percentage of your home will be left as inheritance for your family once your property is sold, regardless of how much interest accrues.
Renew Advice is a trading style of Renew Financial Management, who help over 10,000 people a year plan for their futures and protect the lives of themselves and their loved ones.
We guarantee that, by choosing Renew Advice, you will receive:
- Independent, impartial advice from a fully qualified Financial Adviser
- A dedicated point of contact to handle your case
- Face-to-face visits in your own home
- Telephone advice at any time
At the forefront of everything we do is our values:
- We care
- We deliver
- We improve
- We achieve together
- We maintain a sense of fun
So we can guarantee a caring, friendly, superb service from professional individuals who will work with you to achieve your dreams. Due to our parent company’s position in the financial industry, we are also able to offer you access to exclusive deals with leading plan providers.
- Fully qualified and accredited to provide Equity Release advice and plans
- Regulated and authorised by the Financial Conduct Authority
- Members of the Equity Release Council (ERC)
- Able to recommend ERC-approved plans that guarantee your right to remain in your home for as long as you choose, your right to move properties without penalty (subject to provider criteria) and that you will NEVER owe more than the value of your home thanks to the REC’s ‘no negative equity’ guarantee
1. Telephone: Speak to Renew Advice about any initial questions you may have. We can arrange a free, no-obligation consultation in your home with our fully qualified Financial Adviser at a time that suits you.
2. Loved ones: Talk to your family and encourage them to be present when we make our home consultation visit.
3. First Consultation: At your first consultation, we can discuss the options and find out more about your circumstances to establish if Equity Release is the right option for you.
4. Choosing the right plan: Our Financial Adviser will search the market to find the most suitable plan for you.
5. Second Consultation: Our Financial Adviser will return to your home to discuss the best options available. You will be provided with a personal illustration and can ask more questions.
6. Paperwork: If you choose to go ahead, our Financial Adviser will submit your application to the provider, and your property will then be valued by an independent surveyor.
7. Offer: The provider will issue an offer, and you can discuss the full terms and conditions with our Financial Advisor.
8. Legal work: Independent solicitors acting on your behalf will cover the legal paperwork.
9. Timescales: Although not guaranteed, this is usually an 8–12-week process from application to completion.
10. Money released: Time to make those plans a reality!