Equity release explained
Equity release offers a way to release money tied up in your home that you might need to fund your lifestyle later in life.
With pensions not delivering what many had hoped for, people can find themselves in a position where they are asset rich but cash poor and equity release offers a way to access money tied up in bricks and mortar that is otherwise inaccessible.
Generally a cash free lump sum is released from your home and a lifetime mortgage is taken out against the amount released. The outstanding amount owed at death will be repaid thereby reducing the value of the estate and inheritance tax liability.
Typically, up to 45% of the value of your home can be released and many schemes offer a lump sum release or a more flexible drawdown type of arrangement.
There are various big name providers of such schemes such as SAGA, AVIVA and useful websites such as www.responsibleequityrelease.co.uk so as always it's best to shop around to see where you can get the best deal that suits your particular circumstances and if you have a financial adviser you trust, consult her or him.
Here are a few other things to consider before embarking on your research:
- Minimum age and property value restrictions will apply and there are further restrictions on the type of property accepted for equity release.
- If you have an existing mortgage on your home, or any secured loans, the money you release will be used to pay these off first, but then you would be free to spend the remainder as you wish.
- As equity release is a lifetime commitment ensure that all of the costs and risks involved, including how it reduces the inheritance you leave and how it may affect your tax position and any entitlement to means tested benefits are explained.
