It could be possible to release money from your property but as it’s such a significant step, it is important to understand the process and seek professional legal advice before making any decisions.
So, what is equity release?
This financial process essentially allows you to take out cash from the value of your property without the need for you to move out. Additionally, you won’t need to pay back the money during your lifetime.
Who is the scheme most suited to?
If you don’t want to downsize but you find yourself in a position where you are rich in assets but cash poor, equity release could be an ideal option. It remains a popular option amongst homeowners and statistics show that between April and June 2022, 12,485 plans were taken out by homeowners over the age of 55, with a collective value of £1.6bn.
Are there different release options?
You can opt to take out a lifetime mortgage, which involves borrowing against your property’s value. The amount of money that can be borrowed in this way is dependent on a range of factors, including how much your property is worth.
If that isn’t the ideal option for you, your circumstances may be better suited to a home reversion scheme. This process involves selling part or all of your property to a reversion company. It is important to stress here that if the value of your property increases after signing up to a reversion scheme, the only benefits of that increase you will receive when the property is sold will be on the percentage of the property you still retain ownership of.
Could I lose my home?
If you choose the lifetime mortgage route, you will remain the owner of your property. Conversely, you will be required to relinquish the deeds to your property if you choose the home reversion scheme because the provider will own at least a percentage of your property.
Provided that you remain within the terms of your contract, you will be permitted to remain in your property until the event of your death or entry into long-term residential care.
What are the disadvantages?
When you leave your property, the provider of the scheme you have taken out will sell either a percentage or all of your property and retain the money. This means that your loved ones won’t benefit from the sale of your home.
It is only possible to spend money released from your property once, so although it is possible to proceed with the process from the age of 55, it is imperative to consider the possibility that the cash will have all been spent before you might need to think about paying for support or a care home as you get older.
What if I want to move after releasing equity?
If you have taken out a lifetime mortgage and now have a significant amount of debt, you might find it difficult to purchase a new property. If you opted for a home reversion plan, you may be able to work with your provider to find a suitable property. Typically, this property will need to be more affordable and you must be able to cover both your personal costs and the legal costs of your provider.