What is Equity Release?

Equity release gives you the opportunity to be able to take a tax free cash lump sum from your home so that it can give your finances a boost into later life. There are two main schemes of  equity release these are lifetime mortgages and home reversion plans, there are also drawdown plans available.

SHIP equity release schemes allow you to do the following:

1. 1.You remain in your property for life as long as it is your main residence.
2. 2.If you wish to move home into another similar property then this is allowed within criteria.
3. 3.There is a guarantee that you will never fall into negative equity. This means that you will leave no debt to your estate and you will never owe more than the value of your home.

Why would you release equity ?

If you are over the age of 55 then you will be able to consider an equity release scheme. An example of why people use equity release is to do the following:

1. Have a holiday / travel.
2. To do home improvements or to work on the garden
3. To clear outstanding debt
4. To clear outstanding mortgages
5. To help friends or family
6. To provide a treat for someone

There are many equity release providers around, we would only recommend providers who are members of the SHIP scheme which overlooks and sets the standards for equity release schemes. Choosing the right one is essential as it can save your estate thousands of pounds.

Types of Equity release

Lifetime mortgage

A life time mortgage is when you secure the loan against your property so that you can spend the cash however you wish. In the majority of cases without any monthly payment’s being met.

Over the years Lifetime mortgages have become a popular way to release money from peoples homes this has resulted in some lenders offering drawdown scheme’s that enable you to take the cash when it is required rather than taking a lump sum.

It is also possible for you take an income from the property.

The most common way that a life time mortgage works is that the interest is accrued to the loan throughout the lifetime of the mortgage. The loan plus the interest is repaid when the house is sold usually when you go into long term care or you or your partner dies. It is possible to release around 18% to 50% of your properties value depending on your age.

Drawdown Plan

The drawdown plan works in the same way as a home lifetime mortgage. The difference is that the drawdown plan allows you take the cash when you need it as opposed to you taking all of the cash as a lump sum. You will decide on what amount of equity you would like to loan to and then will be able to drawdown to that amount.

Home Reversion Plans

With a home reversion plan you sell part of your property and receive a tax free cash sum for it with no monthly payments to meet.

You are able to stay within your home rent free for as long as you choose. You are able to guarantee inheritance to your beneficiaries. You will own a share of your property and will benefit from any rises in price as will the company who purchased their share of the property.

Please speak to our advisors regarding these plans who will be able to explain the advantages and disadvantages of each.

SHIP – Safe Home Income Plans is the consumer protection body for equity release products.

We will only recommend a SHIP scheme which has the following guarantees -

1. To allow customers to remain in their property for life provided the property remains their main residence.
2. To provide customers with fair, simple and complete presentations of their plans. This means that the benefits and limitations of the product together with any obligations on the part of the customer are clearly set out in their literature. It should include all costs that the customer has to bear in setting up the plan as well as the tax implications, their position on moving house and the effects of changes in house values on their loan.
3. The right to move their plan to another suitable property without any financial penalty
4. The right for the customer to choose an independent solicitor of their own choice to conduct their legal work. The firm must provide the solicitor with full details of the benefits their client will receive prior to the completion of the plan. The solicitor only signs a certificate once he or she is satisfied that their client fully understands the risks and benefits of the plan.
5. The SHIP certificate signed by the solicitor is there to ensure clients are aware of the terms and implications of the plan including the impact of equity release on their estate.
6. All SHIP plans carry a no negative equity guarantee. This means customers will never owe more than the value of their home and no debt will ever be left to the estate.

Please speak to our advisors without obligation regarding these plans who will be able to advise you on the most suitable scheme.