Get more out of later life with Equity Release

Whether that’s through making those vital home improvements, heading on a trip of a lifetime, helping loved ones get on the property lander – the choice is yours.

Whether that’s through making those vital home improvements, heading on a trip of a lifetime, helping loved ones get on the property lander – the choice is yours.

Equity release is a way of unlocking the value of your home and turning it into a tax-free, cash lump-sum.

It’s essentially a long-term loan that’s repaid using your home once you pass away or require long-term care. Until then, you’ll remain a homeowner with no need to move out.

Whatever financial freedom means to you in later life – renovating your home, paying off an interest-only mortgage or helping your children – equity release is designed to help make it happen.

A holistic approach to retirement planning by accessing your property wealth

We need a new way of thinking about retirement. For the majority of us, property is our biggest store of wealth, more so than even our pensions. Yet, property is currently used much less than pensions in retirement income planning. It’s important to think more holistically about wealth and being better equipped in this way will help us achieve the retirements we all want to have.

Why is this approach so important now? The answer lies in a combination of long-term trends and recent changes to pension and tax laws:

  • We’re living longer – this is clearly not new news, but the very relevant truth of this is that there is less income and less certainty in retirement. The reducing numbers of us who will enjoy final salary pension benefits is also a huge factor.
  • In general, property wealth in the UK continues to rise at a rate of knots. For many of us this is our main store of wealth.
  • Since April 2015 we can now access more of our pension from age 55. In other words, we can access pension funds in the same way we would property wealth.
  • Recent changes to tax rules mean that it is arguably better to use property or other savings and investments first, saving pensions for later.
  • Pensions can now outlive us: many of us will be able to leave pensions to our next of kin, tax-free.

It is clear then, that the way we access property wealth and pension wealth and the ways we use it, are becoming ever more similar. To make the most of this we need to change the way we think about both property and pensions. However, you want to use your pensions, property or other sources of wealth in retirement, it’s crucial to do your homework first to ensure you make the best possible decisions for your individual hopes and dreams.

Finding yourself house rich and cash poor? Then no doubt someone has already mentioned equity release to you as a way of redressing the imbalance.

Release tax-free cash from the value of your home. Unlock a better retirement. Independent equity release advice; call us today.

Accessing your property wealth through Equity Release 

The Equity Release Council exists to promote high standards of conduct and practice in the provision of and advice on equity release.

As a member, we:

  • Ensure that all our actions promote public confidence in equity release as a potential retirement solution
  • Act at all times in utmost good faith
  • Communicate high expectations for equity release outcomes in all our dealings
  • Ensure conflicts of interest are managed fairly and reduced to the lowest practical level
  • Exercise due skill, care and diligence in all that we do and uphold the standards set out by our professional bodies at all times
  • Always act with the best interests of our clients being paramount, treating customers fairly in all our actions.

As a member we comply with the Financial Conduct Authority’s (FCA’s) rules governing the sale of equity release products.  These rules include the requirement that all clients who buy equity release plans are fully advised by our qualified adviser.

Product standards

The Equity Release Council’s product standards are set out below.  We are only allowed to tell you that a product meets these product standards if it meets all of them.

The standards are as follows:

  • For lifetime mortgages, interest rates must be fixed or, if they are variable, there must be a “cap” (upper limit) which is fixed for the life of the loan
  • You must have the right to remain in your property for life or until you need to move into long-term care, provided the property remains your main residence and you abide by the terms and conditions of your contract
  • You have the right to move to another property, subject to the new property being acceptable to your product provider as continuing security for your equity release loan
  • The product must have a “no negative equity guarantee”.  This means that when your property is sold, and agents’ and solicitors’ fees have been paid, even if the amount left is not enough to repay the outstanding loan to your provider, neither you nor your estate will be liable to pay any more.

Independent legal advice

Before the plan is completed, your solicitor will be provided with full details of the plan, including the rights and obligations of both parties (you and your product provider) under the contract, should you choose to go ahead.  Both you and your solicitor will be required to sign a certificate confirming that these rights and obligations have been explained to you and that you wish to enter into the plan.

Information about and explanation of your equity release plan  

You will be provided with a fair, simple and complete presentation and explanation of your equity release plan.  The benefits and limitations of the plan will be clearly set out, together with your obligations under the terms of the contract.  You will be given information about:

  • All the costs that you will have to bear in setting up the plan;
  • The tax implications;
  • What will happen if you wish to move to another property; and
  • How changes in house values may affect your plan.

A Lifetime Mortgage is a type of mortgage where you can choose to extract cash in a single lump sum and/or smaller ‘draw-down’ amounts over time. The loan and the accrued interest can be repaid at any time, but must be repaid by your estate when the last person living in your home, either dies or move to permanent long-term care.

The amount that can be released is dependent on your age and the value of your property and not your income.

  • Equity release allows homeowners to release cash from their property without having to move.
  • Borrowers can take the money in a lump sum or as drawdown.
  • A drawdown plan allows borrowers to take small amounts at different times up to a limit, whereas a lump sum involves taking out the entire amount all at once.
  • Interest rolls up, or ‘compounds’, meaning the new interest is calculated based on the total amount including previous interest amounts.
  • Should historic rises in property inflation continue, then the equity in your property will routinely increase to more than it was at the time of taking out an Lifetime mortgage, in around 10 years.
  • Equity release can be used to purchase a new property, not just releasing funds from an existing property.

This is a lifetime mortgage. To understand the features and risks, please ask for a personalised illustration.

Equity release is often the only method available for older people to extract funds from their property without downsizing or selling. This is particularly useful for those with interest-only mortgages and no repayment vehicle. Of course, it helps that the sums released are tax-free.

As most schemes offer a roll-up of interest it means that no payments are made by the borrower. However, there are options to meet some or all of the interest payments, should this be your requirement.

All of the lenders we recommend are member of the Equity Release Council and abide by their rules, which includes a no negative equity guarantee.

This means that if in the unlikely event your property value dipped below the amount owed, there is no loss to you, as the lender absorbs this risk and will not ask you or their beneficiaries to meet any shortfall.

If you want to move and apply to transfer your lifetime mortgage to a new property that doesn’t meet the lenders current lending criteria, downsizing protection can help. Some lenders offer this type of flexibility.

If you were to move, and the new property meets some lenders criteria at the time, the loan would simply ‘port’ to the new property. However, if not, you would not incur any early repayment charges when repaying the loan, if such a move were to occur at least five years after the loan completes.

Interest rates are currently around the lowest they have been and are usually fixed for the life of the loan. This ensures that borrowers know in advance how much will be owed in the future.

Releasing cash against the value of your home can be a way of gifting wealth to family members, free of inheritance tax.

The ‘facility’ option allows borrowers to have access to a pot of money for the future and are not charged interest until it is drawn upon.

Your clients can repay up to 12% of their loan each year without incurring any early repayment charges, depending on which plan they take, therefore reducing the amount of interest which rolls-up over time.

In joint cases, the remaining borrower can repay the loan in full without incurring any early repayment charges within three years of the death or admission into long-term care of the first borrower.

The majority of the mortgages come with fixed early repayment charges. This means that if you do incur an early repayment charge, you will always be a known cost, providing you with more certainty.

Whatever your particular reason for wanting extra cash, remember equity release is not right for everyone. Before you go ahead it’s important to have considered the alternatives. We will explore and exhaust all these options with you, before recommending an Equity Release mortgage.

For more information or to arrange for our Equity Release expert to contact you
please get in touch