Equity Release In The UK & Everything You Need To Know
These 10 equity release facts are a must-know before you release value from your home or property! We’re laying everything out on the table to make sure you know all you need to know and to make sure you’re all set for an amazing future.
Should I Equity Release?
The question you need to ask yourself is this: am I struggling to find extra cash? Another good question is: how old am I?
If you’re older than 55 and you’re struggling to get some needed money, then equity release is a good option for you. You might also be considering equity release as a means to a more comfortable or luxurious retirement. However, as with anything in life, it’s always good to view the full scope of things before making rash decisions.
Equity release is the answer for you!. It’s a very popular financial plan that allows you, if you own a home, to unlock funds that are tied up in your home, yet still allows you to live in your home at the same time.
If you haven’t heard about this type of financial plan, listen up. Here’s everything you need to know about equity release.
#1. It’s Impossible to Pass On Your Debt
Equity release is very popular because your heirs or family won’t inherit the debt when you die. You won’t have to worry about putting a burden on them when you’re gone.
Better yet, even if your home value depreciates to cater to mortgage expenses, the remaining loan will be cancelled. For the most part, there’s always going to be a guarantee for negative equity.
What does this mean for you?
Well, don’t worry about a thing! Your retirement can be stress-free. Apply today for equity release and see your dreams come true.
#2. Get Financial & Legal Advice Before You Take Out a Plan
The Equity Release Council and Financial Services Authority require you to ask a professional’s help, advice and services. Their rules stipulate that you need to do this even before you take out a plan. A professional financial advisor will help you through all the required processes effortlessly and they’ll also assist in the valuation of your property.
They’ll also help you know about the different charges you might need to pay in the process and they’ll inform you of the early repayment charges. They can also show you other alternatives to suit your needs: like downsizing or using different assets to gain more money.
A financial advisor, or a solicitor, will help you with your legal needs when it comes to equity release. The solicitor will walk you through all your legal rights after you’ve claimed equity release. Always remember, however, to ask a professional for advice and not someone who knows a little about equity release. Rather, ask persons from approved companies like those approved by the by the ERC1 and FCA2.
#3. There Are Certain Guidelines When Moving Homes
You are looking at moving house but unsure whether it’s wise or not since you already took out your equity release. Well, this can be one of the biggest fears of anyone who owns a home and has an equity release. But wait, it shouldn’t be such a big fear at all!
How on earth can that be?
Well, it’s simple. You can always move homes whenever you want. The only requirement for you is to meet all contractual requirements your equity plan provider has.
Before you start house-hunting, just make sure you know what your provider’s needs are regarding that. That way, you’ll surely get value for your money.
#4. No Repayments
Equity release differs from the traditional mortgages. With equity release plans, you can continue living in your house until the day you pass away or when you have to move into residential or special medical care. When that happens, your loan will be paid off with the money of your sold house.
Let me tell you this:
There are certain equity release plans, as with the voluntary repayment plan, that allow you to pay equity release early.
#5. Fixed Interest Rates
Since 2015, equity release interest rates have decreased immensely – and that low interest rate can be constant for life.
Best of all:
How much interest you pay3 when your plan comes to an end will depend on the length and type of your scheme or equity release plan. It’s vital that you remember – equity release plans end when you pass away or move into old-age care.
When it comes to a limited lifetime mortgage plan, and you don’t make monthly settlements, your interests will increase quickly. All interest you owe will be added to your overall loan amount annually. From that time onwards, it’ll grow.
What does this mean for you?
You absolutely need to remember to choose an equity release plan that has a “no negative equity4”promise. Why? Well, it ensures that you and your family don’t owe more than the value of your property.
#6. Look for Any State Benefits
Ever wondered about means-tested benefits? Well, equity release plans sometimes affect your eligibility for these means-tested benefits. So, if you receive means-tested benefits, money in your bank account can affect them. Therefore, it’s wise to check with your plan provider before you proceed with equity release applications or considerations.
Listen to this:
If you withdraw cash from your property, there’ll be less money remaining later on when you want to leave inheritance in your will for your family or children. So, it’s essential to find a balance between what money you want now versus what you’ll want to leave for the future and your family or children.
#7. It’s Wonderfully Regulated
You’ve probably heard of the FCA, otherwise known as the Financial Authority. Well, they govern lenders and financial advisers. However, the financial products also give you some assurance.
It’s according to law regulation that every equity release plan provider needs to sign up as a member of the ERC, or the Equity Release Council. Every provider also must abide by the ERC’s rules, codes and principles.
As if that’s not enough.
There’s also a must-have ‘no negative equity guarantee’. It makes for you to owe more than your house’s value. You are also allowed to transfer your plan to another house if you’ve sold your initial house, without any penalties, thanks to this ‘no negative equity guarantee’.
#8. Tax-Free Cash
If you take out equity release, you won’t have to worry about being taxed for it. That means tax-free cash! If you’re dreaming about home renovations and improvements, going on a travel adventure around the world, or helping your children out, it’s your choice.
#9. Eligibility Checks
You’ll need to meet certain requirements in order to qualify for a plan. These requirements are:
- UK residency. However, some plan providers can enforce localised rules of their own, such as encompassing UK extremes within their remit.
- Property valued £70,000 minimum. Theoretically, there’s no maximum property valuation limit. However, there are providers that can enforce a maximum amount to decrease their risk.
- You have to be minimum 55 years old. But, some plan providers have a minimum age of 60 and older.
#10. Value Amount
One question that’s very popular has to do with your property’s valued amount. Most people would like to find out what their property will be valued at, or how much equity release they’re eligible for. Well, it depends on your provider. Most equity release plan providers offer £10,000 minimum and £100,000 for others.
Your age will also determine that maximum amount that you can borrow or take out of your property. Other determining factors include health, lifestyle, and the property’s market value. Also, if you’re older, you can release more equity.
Equity release is when you sell part or the whole of your home to a provider who then loans you that value in cash. You’ll need to repay it in the future.
Simply put, it takes about 6 to 8 weeks, usually. However, it all depends on your specific equity release plan provider because all companies and providers have different ways of handling equity release. You also need to consider that if there are any complications along the way, the whole process could take longer.
If you want the money as soon as possible, it’s always a good idea to do your research, find out exactly what you need to do, provide them with, and how everything will work to have a smooth and quick process.
Today, many people are using equity they release from their home to get some extra money for different things. Some use it for the holidays. Some use it to help family members out. However, it’s not all glamorous as it may seem. As with anything in life, there’s always two sides, or pros and cons.
The main con is that it doesn’t give you the full market value for your house or property when it comes to equity release. You will get much less cash for your house than you would if you sell the house on the open property market. In that instance, you’d also need to find a new home to move into, but with equity release, you can still reside in your home after releasing its equity/selling it to your provider.
Now listen to this:
Another pitfall or con of equity release is that you’ll have to repay your loan when you die or when you need permanent medical care. This might be obvious to you but just remember this.
The simple answer is yes. You can be refused to release equity from your property or house by a company or a provider. Even though providers have different criteria, most of them will agree on this.
There are a few reasons that this could happen to you, most of which has to do with the property or residence itself, and not the owner. Let’s take a look:
- A flat roof
- Proximity to a commercial property
- Non-standard construction
- Flood risk
- Single skin construction
- Ex-local authority
- Clutter inside the house
- Proximity to electricity
- Spray foam under the roof
So, after all that information, you should be all set and ready for action! Without having any stress hanging over your head. Equity release is such an excellent financial plan, as you’ve probably seen.
However, before making your final decision, ensure that you consider the pros and cons of the equity release plan, the affect it’ll have on your life, and also consider other alternatives to borrowing money that are available out there.
Equity release has never been so popular! Thanks to these facts, you’ll be able to make an informed decision for your future, and the future of your family. If you’re still unsure, use the equity release calculator to work out your estimated equity release possibilities. It’s as simple as that.