Reasons to choose Wilson Browne
With an ageing population more and more people are looking to unlock the money tied up in their home through equity release schemes…
…what are these schemes and who is eligible for them?
Firstly, what is equity release? ‘Equity’ in your home is the difference between the value of your home and any monies that are secured against your property. Equity release turns that difference into money for you to use.
Who is eligible?
The owners of the property have to be aged 55 and over and have to be the named legal owners on the title deeds. It does not matter if you have a current mortgage on your property but this will have to be repaid when you take out an equity release.
What are the advantages?
By releasing the money from your property you could pass along children’s inheritance early, finish those home improvements or jet off on a holiday of a lifetime, all whilst enjoying your retirement.
How does it work?
There are two main types of equity release schemes; life-time mortgages and home reversions plans. The most popular of these schemes are life-time mortgages. With these you can either choose to release equity from your home in a lump sum or you can choose to ‘drawdown’ cash sums as and when you require them. There are no monthly repayments although some plans do allow the option to make payments should you wish to do so. If you do not make any repayments, the interest will build up over time on the amount borrowed and will become payable upon your death or when the property ceases to be your main residence.
Home reversion plans are much less common and mean that you sell a percentage of your property to the plan provider and they pay you a lump sum or agreed instalments in return and provide you with the right to live in your property, rent free, for the rest of your life. Upon your death, the property will be sold and the proceeds will be used to settle your equity release debt.
What if I want to downsize?
If you want to downsize or move home in the future you will not be prevented from doing this. Some plans allow you to downsize and repay your loan without penalty and others will allow you to transfer the loan to your new property.
Are there any disadvantages?
One of the main disadvantages of an equity release scheme is that it will decrease the monies available in your estate following your death. It is therefore a good idea to discuss any plans with your family beforehand to avoid any unhappiness in the future.
I’m interested, what are the next steps?
If you are interested in an equity release scheme your first port of call should be an independent financial advisor. They will discuss with you the plans available and whether it is the right thing for you. It is also important to discuss the plan with your solicitor who will explain the legal consequences of proceeding with the plan and explain what they mean for you and your family as well as dealing with the Conveyancing aspect of the transaction.