Are You Thinking of Releasing Equity From Your Home?

Are You Thinking of Releasing Equity From Your Home?


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Sales of equity release plans have risen over the past few years. In Scotland, figures from the Equity Release council state that customers took an average lump sum of £39,834. Average figures for the UK across the whole of the UK sits around £72,000 with those in the South East releasing an average of £84,000.


What is Equity Release?


Equity release schemes were first introduced in 1965 and have since gone through a number of changes. It is a method of retaining your property whilst also obtaining a lump sum or steady stream of income from the value of the property.


Who Can Enjoy An Equity Release Scheme?


If you are a UK homeowner aged 55 or older, you may be eligible to access the money tied up in your home.


What Are the Different Schemes?


There are two types of equity release: lifetime mortgages, where you can borrow money against your house; and home reversion, where you sell a share in your property.


Lifetime mortgages In a lifetime mortgage you can borrow a proportion of your property’s value and interest is charged on this sum. You typically don’t pay anything back until you die or sell your home. The interest is compounded across the period of the loan.


Home reversion With a home reversion scheme you would typically sell a share of your property to the provider for less than the market value. You have the right to live in the property for the rest of your life. When your move into care or pass away the property is sold and the provider receives the same share of the property as they paid (e.g. if you sold 40% to the provider they would receive 40% of the sale price).


Why Has It Become So Popular?


Equity release has become popular in recent years for a combination of reasons. One of the key reasons people release income from their property is to supplement their lifestyle in retirement. Rising house prices have resulted in property becoming a key part of many people’s retirement plan. For some, the optimal thing to do is to downsize, however for those who wish to remain in their home, equity release offers an alternative way to access the value in your home, whilst still being able to live in it.


Another reason why equity release has become popular is due to changing attitudes. Whilst at one time it was expected that property would be cascaded down the family, nowadays many younger generations do not have the same expectations, or would rather their parents used the equity to enjoy their retirement – which is likely to now last two or three decades.


Why Release Equity from Your Property?


There are many reasons why you may release equity from your home. Some of the most popular reasons include to fund home or garden improvements, to fund a holiday, to pay off credit card debts or loans.


What Do You Need to Consider?


Releasing equity from your home is not a simple decisions. It is a lifelong commitment and it is important that you fully understand the obligations and consequences before committing to a plan.


Seeking equity release advice from a trustworthy financial advisor is an important step to ensure you are making the right decisions. A financial advisor will be able to assess your needs and circumstances and let you know whether or not you are eligible for equity release and whether or not it would be a wise financial move.


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