October 24th 2011 Posted at Equity Release
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Equity release is the way you release money from the value of your home!
Equity release is the way you release money from the value of your home. How you release these funds is vital in ensuring your future is secure so advice is always required in Equity release tranactions.
Equity release is predominantly utilised by the retired and is becoming an important part of retirement planning, either being used to provide an income or a lump sum to make retirement more comfortable or exciting.
Equity Release schemes available are split into two types; lifetime mortgages and home reversion plans. With lifetime mortgages you take out a loan secured against your home and home reversion schemes involve selling all, or part, of the ownership of your home.
Which type suits you best is really down to your personal situation but advice should be sought.
Are you over 55 and own your home !
Equity Release is available to people aged 55 or over who own their own home and are UK residents.
Your home must be in mainland UK or Northern Ireland and in addition equity release providers may have different criteria which may limit the type of property they are willing to consider.
If you have a mortgage or loan on your home then this will need to be repaid either from your own funds or from the equity release funds.
There can be no more than two registered owners of your home. If you have someone aged 18 or over living in your home who is not an owner they must sign a disclaimer. |
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Equity release is not suitable for everybody!
Equity release schemes can be a great way of releasing funds from the value of your home but they are not suitable for everyone. It is vitally important to understand the risks and to appreciate the cost, the level of flexibility (for instance if you wish to move home) and also the potential effect on future state benefits.
For further information the FSA (Financial Services Authority) has produced a Guide to Equity Release which outlines things to bear in mind. Some of the things to consider are:
- Does the scheme have a negative equity guarantee? This means that if the value of your property decreases any outstanding debt after the sale of your house will not be passed onto your beneficiaries.
- Does the equity release provider allow you to move home?
- Who has the continuing responsibility for maintenance of the property?
- Do you understand the terms and conditions of leases for home reversion and in what circumstances could you lose your home?
- If you are using the funds to reduce potential inheritance tax and do not survive for 7 years or IHT rules change the scheme you have set up may not be effective.
The FSA Guide goes into more depth and you should study their guide fully as our list above does not cover all the risks you may face and it is essential to obtain advice. It is also important to discuss any advice you are given with a solicitor who will also carry out the necessary conveyancing work. |
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