4 little known truths about equity release
In the UK, there are several eligibility criteria that must be met in order to qualify for equity release
As people approach retirement age, they often face the challenge of making their financial resources last for the rest of their lives.
Many retirees have invested in property over the years, and equity release is a way to access some of the value tied up in their home without having to sell or move out. Equity release has become an increasingly popular option for people looking to supplement their retirement income, cover care costs, or help family members financially. However, it is important to fully understand the potential risks and benefits before considering equity release. In this article, we will explore what equity release is, how it works, and the different types of equity release schemes available in the UK. We will also discuss the eligibility criteria, the costs involved, and the potential advantages and disadvantages of equity release.
4 little known truths about equity release
Eligibility for government benefits
Equity release can have an impact on your eligibility for government benefits: While releasing equity can provide you with additional funds, it can also impact your eligibility for certain government benefits. This is because the additional funds could be considered as income, which can affect your means-tested benefits. Source: https://www.moneyadviceservice.org.uk/en/articles/equity-release-what-it-is-and-how-it-works
Ability to move home
Equity release can impact your ability to move home: If you release equity from your home, it can limit your options when it comes to moving home in the future. This is because the equity release provider may have a charge over your property, which can make it more difficult to sell or move. Source: https://www.which.co.uk/money/retirement/options-in-retirement/equity-release/equity-release-pros-and-cons-ave1m4c4tl4n
Equity release can be expensive
Equity release schemes can come with significant costs, including arrangement fees, valuation fees, legal fees and more. These costs can add up quickly and reduce the amount of equity that you can release from your home. Source: https://www.legalandgeneral.com/equity-release/what-is-equity-release/is-equity-release-expensive/
Not suitable for everyone
Equity release may not be suitable for everyone: Equity release can be a good option for some people, but it's not suitable for everyone. It's important to consider your individual circumstances, including your age, health, and financial situation, before deciding whether to release equity from your home. Source: https://www.ageuk.org.uk/information-advice/money-legal/benefits-entitlements/equity-release/
What is equity release
Equity release is a financial product available in the United Kingdom that allows homeowners who are over the age of 55 to release some of the equity tied up in their property without having to sell it or move out. Equity release is essentially a way of unlocking the value of a property to provide a tax-free lump sum, a regular income, or a combination of both. The equity can be released either as a lump sum payment or as a series of smaller payments over time.
There are two main types of equity release schemes available in the UK: lifetime mortgages and home reversion plans. Lifetime mortgages involve taking out a loan secured against the value of the property. The loan is repaid when the property is sold, usually after the owner dies or moves into long-term care. Home reversion plans involve selling a portion of the property to an equity release provider in exchange for a tax-free lump sum or regular income. The owner retains the right to live in the property until they die or move into long-term care.
Equity release is a popular way for retired homeowners to boost their income in retirement or pay for care costs. However, it is not without risks. For example, the amount of equity that can be released depends on the value of the property and the age of the homeowner. Interest rates can also be higher than traditional mortgages, and there may be early repayment charges. It is important to seek independent financial advice before considering equity release.
Who is eligible for equity release
In the UK, there are several eligibility criteria that must be met in order to qualify for equity release. The main criteria are:
Age: The homeowner must be at least 55 years old, although some providers may require a higher minimum age.
Property value: The property must be worth a minimum amount, which varies depending on the provider.
Property type: Equity release is usually only available on properties that are the homeowner's main residence. Some providers may also accept second homes, but the amount that can be released may be lower.
Equity: The homeowner must have a certain amount of equity in the property. The amount that can be released will depend on the value of the property and the amount of existing mortgage or other loans secured against it.
Health and lifestyle: Some equity release providers may take the homeowner's health and lifestyle into account when determining eligibility. For example, if the homeowner has a serious medical condition, they may be able to release more equity.
It is important to note that equity release is not suitable for everyone and there may be other factors that affect eligibility. It is recommended to seek independent financial advice before considering equity release.