Tag Archives: UK Equity Release

What is Equity Release?

Equity release schemes are vehicles that enable you to release tax free cash that is locked up within your property, which once received can then be spent as you wish. The various UK equity release plans currently available include both lifetime mortgages and home reversion plans. The lifetime mortgage market can be sub-divided into: –

  • Drawdown Lifetime Mortgage

– Roll-up equity release scheme where you are provided with an overall cash reserve facility, but you take only a portion of this initially. Interest is only charged on the money actually withdrawn. Further funds can be taken from the reserve facility at short notice, with no further valuation or set up fees required. Currently the most popular form of equity release scheme.

  • Interest Only Lifetime Mortgage

– Rather than interest rolling up & compounding, an interest only lifetime mortgages plan allows you to repay the interest charged. This protects the equity in the property for your beneficiaries & maintains a level balance.

  • Enhanced Lifetime Mortgage

– A recent innovation whereby upon calculating the maximum equity release possible, certain lenders will take into account medical history as a factor. Should ill-health have proven to have existed, then an enhanced lump sum can be offered by the equity release provider. This will usually be much higher than the normal maximum equity release lump sum available.

An equity release adviser should always be sourced in order to explain all the available equity release plans in full to help you decide which is best suited to your individual circumstances.

Lets Start with the Background History to Equity Release

Equity release schemes have increased in demand with the elderly generation not just in the UK, but all over the world. These schemes have come a long way since their introduction back in the mid 1960’s. However, this hasn’t been without its problems & adverse press coverage.

The stigma of the elderly generation having been fleeced by the Shared Appreciation Schemes (SAM’s) back in the 1990’s still lingers. However, important steps have been taken to clean the image of equity release schemes. This has been led by FSA (Financial Services Authority) regulation of both lifetime mortgages & more latterly home reversion schemes have come under its wing. The current front runner in hailing the equity release cause is SHIP (Safe Home Income Plans).

Launched in 1991, SHIP has laid down a code of conduct that all equity release providers must follow to be a member of their trade body. SHIP is the representative of the equity release market in terms of promotion & statistics covering members which include the main providers of lifetime mortgages and home reversion plans.

Now confidence has been restored, equity release schemes have become a mainstay of providing financial freedom in allowing people over the age of 55 to utilise their main asset. These equity release schemes enable citizens to spend their retirement days in peace by way of providing a tax free capital lump sum or an income for life.

How do these schemes usually work?

Different schemes offer different amounts but the basic principles remain the same. The three options are a one-off cash lump sum, drawdown facility from which you can take ad-hoc payments when required or an income for life. The most popular route these days for financial & flexibility reasons are the drawdown equity release schemes. These schemes give the amount to you in regular instalments as per your convenience.

The most crucial of all conditions that a prospective client should fulfil is that they must have little or no outstanding mortgage. Based on a combination of age & property value will determine how much can be raised. If a mortgage is in force, then as a minimum, this calculation must cover the outstanding mortgage amount. However, for many a further lump sum maybe required for additional expenses such as home improvements, new car, holidays or gifting to the children.

It is always wise to be on the lookout as only then will you get the best deal available in the market. Analyse and evaluate your overall financial position before you jump into any equity release scheme, making sure to choose the one that gives you the most advantages. Consult an equity release specialist who can assess the whole of the equity release market & provide independent advice. Such companies that are major brokerages in UK equity release schemes are: –

• Equity Release Supermarket

• Compare Equity Release.com

• EquityRelease2go.com

For contact details on all these equity release advisory services call our dedicated freephone number on 0800 678 5159