Secure UK Website

Key Information

 

  1. Criteria
  2. What is equity release? 
  3. Lifetime Mortgage? 
  4. Home Reversion
  5. What are the benefits and risks of equity release?
  6. Equity release: what happens when you die?

1. Criteria

To be eligible for equity release you will need to:

  • Own a property in the UK Homeowner
  • Be living in that property
  • The youngest homeowner must be at least  55 years old
  • Have a property value of at least £70,000

 

2. What is equity release?

Equity release is a product that lets homeowners aged 55 and over, take some of the money built up in their home, as a tax-free cash sum. There are two types of equity release, lifetime mortgages and home reversion plans.

 

3. Lifetime Mortgage

A lifetime mortgage enables you to release a tax-free cash lump sum from the value of your home. You will continue to own your home completely and retain the right to live in it for the rest of your life. You can choose to pay the interest each month or make voluntary payments and roll up the interest on the loan amount and any interest added already. The amount borrowed plus accrued interest is usually repaid from the proceeds of the sale of your property when you die or move permanently into long-term care.

It is important to note that the loan is secured against your home,  will reduce the value of your estate and could affect means tested benefits.

4. Home Reversion

A home reversion plan involves selling part or all of your home to a home reversion provider. You receive the sale proceeds as cash, which can be paid as regular instalments or as a single lump sum. On any home reversion plan  you retain the right to stay in your property rent-free for the rest of your life. You will receive less than the full market value of your home (or the portion of your home that you sell) because the buyer cannot re-sell the property until you die or move permanently into long-term care. As you will have sold all or part of your home to the reversion provider, this will reduce the value of your estate.

 

5. What are the benefits and risks of equity release?

Benefits:

  • You can continue to live in your current home
  • The cash you release is tax-free
  • Some equity release products enable you to receive regular payments
  • In most cases, you can make voluntary repayments. The debt will usually be repaid from the proceeds of the sale of the home when you die, or move permanently into long-term care
  • You can continue to live in your own home for the rest of your life, or until you move out permanently into long-term care.

Risks:

  • The value of your estate will be reduced leaving less money for your beneficiaries on your death
  • Any means-tested benefits you receive may be affected by equity release - your adviser will check this for you before recommending a product
  • With Lifetime mortgages, the amount you owe will grow over the longer term, unless you choose to make full interest payments.
  • Home reversion plans can be repaid, but your home would need to be bought back from the reversion company at full market value.

6. Equity release: what happens when you die?

A lifetime mortgage must be repaid when the last borrower on the loan dies, or moves out of the home and into long-term care, using the proceeds from the sale of your home. The sale must take place when the last named person on the lifetime mortgage dies. There's a 12 month period for your estate to make the sale and repay the mortgage, any money that is left after the repayment, or where there is Inheritance Protection, will be kept by your estate.