Tag Archives: Releasing Equity

The Case for Equity Release

Not everyone can qualify for releasing equity from their property, but for those that do it can offer some real financial advantages. The following is going to look at equity release, what it is, how it can help, and what you have to do in order to qualify. Throughout the article you should learn what steps to take and have an educated decision made. If you find it is not the right product for you that is okay because at least you know what is going to work or not for your retirement years.

Qualifying Assessment for Retirees
If you are over 55 and have a property that is worth a fair bit more than you paid for it all those years earlier, then you may have considerable equity that you can use as collateral for a loan. The even better news is that you may never have to repay the loan, because it will be repaid after your demise, by the eventual sale of the property. Ideally you need to have paid off your mortgage or be fairly near to the end of it to make this work, although many equity release companies don’t mind too much if you still have a first mortgage as long as the outstanding debt amount is not too great. They will, in effect, take a second charge against your home, and you can usually receive it as a lump sum which you can use to buy an annuity that gives you an income for life.

Your age is a factor, but there is another area that is considered on the application – your health. Your health is definitely something that can be used to your advantage in retirement when discussing equity release like lifetime mortgages. This is due to the enhanced lifetime mortgage product that is newer to the market.

It allows you to gain a larger lump sum when you have a health issue such as cancer, diabetes, obesity, and other issues that could reduce the longevity you have. You still have the same terms as the main roll up lifetime mortgage; however, the thought is you pay off this loan earlier than someone in good health. In this case poor health can be an advantage.

Income is only a factor if you elect to go with the interest only lifetime mortgage. This type of mortgage requires a monthly payment of interest. Most companies want to ensure that you have disposable income for these payments, but later on if things become too hard with making the payment you can roll over into a lump sum mortgage where the interest starts accruing on the loan.

Another qualifier is the valuation of the property. It has to be enough to make a loan worthwhile for the lender.

Inheritance Issues
It is worth remembering though, that if you take out all the equity in your property now then there will be nothing left for others in the family to inherit. Some would argue that it’s for the children to make their own way in life and that you should enjoy the proceeds of your assets yourself. It is of course, a matter of personal choice, but there is nothing to stop you taking just some of the equity for yourself and still leaving a worthwhile inheritance, depending of course on the amount of disposable equity that you have.

Structuring the Loan to Benefit You
The equity release plan can be structured in a number of slightly differing ways. You can have, for example, what’s called a Lifetime Mortgage where you retain ownership of the property and therefore benefit from any future increase in its value, and you retain the right to live there for the rest of your life without making any repayments on either the capital or interest. Alternatively you can take an interest only mortgage and make regular repayments to cover the cost of the interest on the loan. You can even get flexible mortgages where you can take a lump sum now and further amounts later, within the limits of the total sum agreed.

There may be certain tax implications or loss of state benefits if you take a lump sum through equity release so it is well worth seeking the advice of your accountant or an independent financial advisor, since once you have committed to a contract you cannot easily change your mind. In essence it is simply a case of deciding whether you want “jam today” or “jam tomorrow”. Take a moment to find out if releasing equity from their property is possible for your family.

Is It Hard Releasing Equity From Your Home?

It is not at all hard to release equity from your home under the given market conditions. Releasing equity from your home can be a straight forward event under the right advice from brokers or independent financial advisers. It is important that you seek advice only from the qualified and approved independent financial advisers. They can help and guide you in understanding all the key features as well as the associated risks related to the different equity release schemes regulated by the Equity Release Council.

The eligibility for taking an equity release on your home in not difficult. You must be at least 60 year old for opting a home reversion plan, however the minimum age for lifetime mortgages is defined as 55 years by most of the equity release providers. You must also own a home in UK, which is in reasonable state and free from any outstanding mortgage.

If the house is under some shared arrangement with your spouse or partner then the equity release can be taken jointly by the consent of both the partners. Moreover, in joint occupancy cases, the age of the youngest homeowner must be at least 55 years. The process starts by fixing an appointment with a financial independent adviser or broker. Financial adviser will recommend you some equity release schemes depending on your individual requirement and financial state.

The application process for releasing equity from your home starts by filling an application form with the help of your financial adviser. He will also help you to submit the form to an equity release provider along with the required fees. The equity release provider will appoint a RICS qualified surveyor to visit your home and do the valuation of your property after your application form is received.

An offer will be made to you stating the amount that can be borrowed and your solicitor will help you understand all the legal terms and conditions attached to it. You as well as your solicitor will be required to sign the acceptance form and send it back to the equity release provider. After completing all the legal checks and formalities, the equity release provider will release the funds to your solicitor who will assist you to get the money transferred in your account.

Can I use Equity Release to pay for Long Term Care?

Retirement is supposed to be the golden period when you should be able to reap the benefits of your working life. But as people live for longer and the cost of living increases, financial planning during retirement is becoming more and more significant. There are thousands of pensioners across the UK without enough cash to support their lifestyle during retirement and they are looking towards equity release plans for a solution.

Real estate prices have soared since the 1990’s and houses are essentially pots of gold waiting to be opened. But a house doesn’t turn into usable money unless it’s sold, and this is exactly where equity release schemes come into the picture. Equity release plans address this issue by allowing older homeowners to release some of the value built into their property and using it as cash.

Different people have different reasons for releasing equity from their home. Some people need more money to support their lifestyle after retirement, and equity release plans allow them to supplement their pensions for more comfortable monthly income. Others may need extra cash for a specific one off expense. This could be anything from building a conservatory, buying a car, or an international dream holiday!

Another important expense during old age can be paying for home care. Some people who require permanent care prefer living in their own homes instead of moving into a care home. As long as the owner is living in their home, the equity release scheme can remain in place. So an ER scheme can be used to pay for the provision of care as long as you’re living in your own home.

Equity release plans need to be closed once the owner has died or moved into a permanent care home. In case of joint applicants, this applies to the second applicant. So the house can only be sold when both the applicants have either died or moved into care. As such, ER can also be used to support paying for care in a care home, as long as the second applicant continues to live in the property.

Releasing equity can be a good option for those who own a property, and wish to increase their income or raise money for a particular cause. Equity release plans work for some and don’t work for others, so they need to be considered carefully before taking a final decision.

What can I spend the proceeds of an Equity Release on?

Equity release is a way of turning the value tied into your home into cash. It is becoming increasingly popular today and more and more people want to use this option to use some of their home equity to generate additional income during retirement. There are many equity release plans available from several different providers.

Retirement is known as the golden period of life, when one is finally free to do what one wants. But ironically, it is during retirement that cash flow can be a problem and this can limit one’s freedom in so many ways. A pension is generally the main source of income during retirement, which may not always be enough to maintain a comfortable lifestyle. This is why more and more homeowners are considering equity release plans as a way to supplementing their income.

Some people have enough income to support their day to day life, but the problem arises when there is a relatively big one-off expense that needs to be made. This could be anything from home improvement work, to a dream holiday! The released equity can be taken in regular monthly installments or as a lump sum and one off expenses is another reason why people consider releasing equity from their home.

There is absolutely no restriction on what you can use the money for. The proceeds you get from equity release plans are tax free and could be used for a variety of purposes, depending on personal needs. Some common uses of equity release proceeds are home improvement works, buying a new car, investing in a second property or paying for care in your home. Another common use is to gift money to children and family or as supplementary income.

Equity release plans are many and varied. As the concept caught on and became popular, more providers entered the market and equity release schemes became flexible. Increased competition among providers has resulted in a customer-friendly market, with favourable interest rates and better terms of contract. Equity release schemes are now fully regulated by the FSA (Financial Services Authority) which was not always been the case.

Equity release plans can be a good way to generate usable cash from the equity built on your property without selling the house. Obviously, equity release does have some potential risks and disadvantages, and is not for everyone. To understand more about how equity release works and whether it’s right for you, seek the advice of an independent financial expert.

What happens to my equity release if I want to move house?

As property prices have soared in the past two decades, home owners have seen an unprecedented rise in the value of their homes. As the cost of living increases, it is not at all surprising that the concept of releasing equity from your home to supplement your income during retirement has caught on furiously. Home equity release is essentially a loan that you can take against the value of your home, while continuing to stay in your property. This loan is recovered after the property is sold.

Home equity release plans are designed for older people, especially pensioners, who own a home but do not have sufficient cash flow to maintain a comfortable lifestyle or perhaps require additional money for a particular goal. The loan can be secured as a lump sum or more commonly in monthly installments. Home equity release is available in two main types of loans, home reversion plans, and lifetime mortgages.

There are no shortage of equity release schemes available on the market. There are many different companies offering different types of equity release loans, all promising to provide the optimum solution between keeping your property and increasing your income. As equity release becomes more and more popular, more flexible products are introduced to meet this growing demand.

One of the most common questions asked when it comes to home equity release is whether you can continue to live in the house for as long as you wish. The answer is yes, as most equity release loans are recovered only after the house can be sold. This can only be done after the owner has died or moved into long term care. However, it is absolutely necessary to understand all the terms and conditions of the equity release mortgage before going ahead with it.

While equity release mortgages work beautifully for thousands of pensioners who require an additional income, it also has its own drawbacks which could make it a wrong option for some. Once you have taken a home equity release loan, it is very difficult to back out due to the complicated terms of the contract. It is therefore vital to seek independent financial advice before signing an equity release loan contract.

You can get equity release explained by the financial expert who can guide you on which type of mortgage will suit you best. Independent advisers can give objective and fair advice on the pros and cons of different home equity release schemes for your particular circumstances. A lot of information is also available on financial resources on the internet, as well as on comparison sites which allow you to compare equity release plans.