What is equity release? For those over the age of 55, you might have heard this term being used more and more frequently. In summary, equity release enables eligible homeowners to release some of the value you have built in your home as a tax-free lump sum to your account. You could also opt for “drawdown” product, which allows a homeowner to release equity in amounts over time. One of the advantages of equity release is that you can continue living in your home as you do not need to find somewhere new. There are several reasons why a homeowner would consider equity release. If you are one of the many looking into equity release, keep reading to find out a few key things to keep in mind. Types Of Equity Release Before you dive straight into the equity release process, you need to know the type of equity release options to choose between. The first option is a lifetime mortgage. A lifetime mortgage means you will take out a mortgage secured on your property. This is only possible if the house you are taking a lifetime mortgage out of is your primary residence. The other is a home reversion. Home reversion means that you will sell your home, or part of it, to a home reversion provider, in return for a lump sum. There will be an amendment to the title deeds with the Home Reversion company being added as the owner of the property, and the amount of tax-free money received as payment will usually be at a discounted figure compared to the part of the property sold. With a home reversion, you can continue living in the property, despite selling shares. The agreement you will make is that you will continue to insure the home and maintain it to the best standard possible. Timeline For Equity Release A vital question you will likely want to have answered when looking into equity release is the timeline for when the money will reach your account. If you question how long does equity release take to hit your account, it is worth speaking with experts and reading online guides, like this one from Retirement Solutions, which helps answer this question. Utilise these resources to understand a how long the process will take. Each situation will be different. If You Are Eligible As mentioned, homeowners over 55 will likely have heard the term equity release being used more than those in their 30s or 40s. 55 is the minimum age required to release equity if you’re a homeowner, and if it’s a joint application the youngest homeowner must be 55 or over. It is just that some people are in this position when they are around that age as they may be homeowners. They can consider releasing tax-free cash from the value of their home. If you are able to move forward, how much you wish to release will also be influenced by your age. In addition to age, the value of your home will also affect how much you would be able to take out. Aside from age, other factors that can influence whether you are eligible for equity release include the amount you wish to release, your current income and what you have planned for the future. The basic eligibility requirements for equity release products are that you are a UK homeowner, you are aged 55 years or over and your property is valued at £70,000 or more, but the amount available to release does vary from lender to lender, and will also depend on the age of the homeowners, the property condition and the health of the owners. Think About Your Future Of course, the sound of receiving a lump sum of money directly to your account is tempting. Many will think of several ways to spend some of the money. However, if you are considering releasing equity, it is worth thinking about your future. Taking out a lump sum will impact your financial situation later in life, but also any choices your future self will have to make. When looking into equity release, consider if your future self will be in a comfortable situation financially if you take release equity now. It might be a difficult question to ask yourself, but it is certainly one you want to take your time to answer. Consider All Options One thing that is best to avoid when looking into equity release is developing tunnel vision. Meaning, try to avoid focusing on one option and moving forward without considering all of the choices available to you. When looking into equity release is it advisable to speak with an independent equity release adviser, who will search the whole market, and if equity release is right for you, will recommend the right product based your individual circumstances. Understandably, the number of options available can be overwhelming. An adviser can help you to break down the choices into more manageable pieces to consume and make decisions on. The Bottom Line Utilise all the points mentioned above when looking into equity release. In addition to these points, spend time conducting your own research and reaching out to experts in the field. Use their knowledge and experience in equity release to help guide you on what the best route is for you financially. Remember that whilst one option might be ideal for some, it is not suitable for others. Hence why having an open mind when looking at all choices is ideal. Spend time thinking about your answer, and weigh the pros and cons of equity release. When you are ready and confident about your decision, you can look at the steps you need to take to move forward.
