Essential Equity Release Facts You Need to Know in 2024

It's crucial to know that equity release may affect your entitlement to means-tested benefits and your estate's value. Understanding the different types of equity release schemes, like lifetime mortgages and home reversion plans, is essential.
  • Last Updated: 17 May 2024
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  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.

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Francis Hui
Do You Want to Discover 14 Key Facts About Equity Release in 2024? Find Out How Equity Release Is Regulated and What It Means for Your Right to Stay In Your Home. Read On...
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Key Takeaways
  • Equity release means homeowners aged 55 and over can unlock wealth tied up in their property, providing a tax-free cash lump sum or regular income.
  • Key considerations include a potential decrease in estate value, alterations to tax status, and the chance to obtain a tax-free sum without leaving your home.
  • You can explore lifetime mortgages for ownership retention or home reversion for upfront cash; however, it’s important to weigh the impact on pensions and benefit eligibility, highlighting the importance of professional advice to grasp all effects.

Knowing these equity release facts can help you avoid being a victim of a scam!

Every year, an increasing number of homeowners1 over the age of 55 use equity release to access the wealth in their property. 

Entering into an equity release agreement without proper expertise, on the other hand, may devastate your finances. 

In This Article, You Will Discover:

    We have delved into the topic, reviewed countless plans, and summarised equity release example you need to know about equity release before you make your final decision. 

    Therefore:

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    Essential Facts About Equity Release

    What Does Equity Release Mean for Homeowners Today?

    In today’s market, equity release offers homeowners over 55 a way to access their property’s value without needing to sell.

    What Does Equity Release Mean in Today’s Market?

    Equity release schemes enable homeowners over the age of 55 to access the locked-in value of their property.

    It’s an alternative route to gain funds, particularly useful if other retirement resources are inadequate.

    These schemes offer either a lump sum or regular payments, with the loan amount and accumulated interest usually paid back from your estate later on.

    Equity release upon death: Equity release plans often involve the repayment or settlement of the loan upon the death of the homeowner.

    Understanding its implications on future estate value and inheritance is key.

    Learn More: What Is Equity Release In The UK

    What Key Information on Equity Release Should You Know?

    Equity release is a financial solution where homeowners aged 55 and above can unlock the wealth tied up in their property without having to move.

    There are two main types: lifetime mortgages and home reversion plans.

    A lifetime mortgage is a loan secured against your property, while a home reversion plan involves selling all or part of your home in return for a lump sum or regular income.

    One crucial fact is that equity release can impact your entitlement to state benefits and your tax position.

    It’s vital to get expert financial advice before proceeding.

    Also, note that all equity release products should be regulated by the Financial Conduct Authority (FCA) to ensure they’re safe and suitable for consumers.

    Finally, remember that it’s possible to make no negative equity guarantees, ensuring you’ll never owe more than your property’s value.

    What Are the Benefits and Drawbacks of Choosing Equity Release?

    Equity release provides a financial boost in retirement but reduces inheritance and may affect state benefits eligibility.

    What Are the Pros and Cons of Equity Release?

    The pros of equity release include providing financial freedom in retirement, allowing homeowners to access cash without selling their property.

    It can be a lifeline for covering living expenses, home improvements, or even gifting to family members.

    However, the cons are significant; it reduces the value of one’s estate, can affect eligibility for means-tested benefits, and typically involves higher interest rates than traditional mortgages.

    It’s a long-term commitment that requires careful consideration.

    14 Critical Equity Release Facts: What You Must Understand

    If your are considering releasing equity from your property, you must know these fourteen facts concerning equity release.

    How Can You Pay Back the Interest on Your Equity Release Loan?

    With equity release, you could gain access to a cash facility to make multiple withdrawals, rather than one large lump sum if you prefer.

    This is known as a drawdown lifetime mortgage. 

    Do You Have the Right to Stay in Your Home with Equity Release?

    Instead of allowing the interest on your debt to accumulate, you may pay it back in monthly instalments.

    While there is no obligation to do so, you can volunteer to repay the monthly interest, stopping and starting whenever you wish.

    You Have the Right to Stay In Your Home

    According to the Equity Release Council guidelines, you have the right to remain in your house for the duration of your equity release plan.

    Can You Be Eligible for Equity Release Without Owning Your Home Outright?

    You do not have to own your house outright to be eligible for equity release.

    If you have a small portion of your mortgage remaining, your are still eligible for equity release. Although, you will be required to pay it off with the cash you unlock. 

    Is Equity Release Regulated by a Governing Body in 2024?

    Equity release is supervised by a governing body called the Equity Release Council, which has stringent guidelines to safeguard consumers.

    You should always select a lender that is a member of the Council.

    How Does a Lifetime Mortgage Affect Homeownership in Equity Release?

    You retain 100% ownership of your home with a lifetime mortgage, but you sell all or a portion with a home reversion scheme.

    With both options, you can continue living there. 

    A lifetime mortgage means you get to enjoy everything your home offers, such as security, stability, comfort, and the satisfaction of owning a precious asset that is appreciating in value over time.

    Will You Ever Owe More Than Your Property’s Value with Equity Release?

    The no-negative equity guarantee2 ensures that you will never owe more than the value of your home.

    The Equity Release Council has established this to ensure that your heirs are not left with equity release debt when you die or move into permanent care.

    This guarantee ensures that any excess amounts payable from your equity release will be wiped off if they exceed the market value of your home, even if the property market plummets.

    How Do You Unlock Tax-Free Cash with Equity Release?

    The cash you unlock with equity release is tax-free, meaning you will not have to pay any income tax or capital gains tax on it. 

    You can also use equity release to avoid inheritance tax3.

    What Is the Minimum Age for Equity Release Eligibility?

    The minimum age to release the equity from your home is typically 55 years old. Although, some lenders do differ.

    However, there is no upper age limit for some products. Some may have a cap of between 80 and 95.

    What’s the Minimum Property Value Required for Equity Release in 2024?

    To release equity, your property must be valued at least £70,000 – although, in rare situations, you may still access up to 65% of the value of your estate.

    How Do Health and Lifestyle Impact Your Equity Release Options?

    With an enhanced lifetime mortgage, lenders may consider your health and lifestyle to offer you maximum equity and minimal interest rates. 

    Can Equity Release Interest Rates Be Fixed for Life?

    The majority of equity release interest rates* are fixed for the remainder of your life. 

    However, some plans have variable interest rates that are capped.

    *While we regularly review interest rates, these may have changed since our last update.

    Will The Equity Release Debt Be Passed On to My Heirs?

    Your equity release debt will not be passed on to your heirs. 

    Instead, when you die or require long-term care, the loan and any compound interest will be paid off through the sale of your property.

    How Can a Solicitor Help With the Legal Aspects of Equity Release?

    You will be guided through the legal parts of the equity release process by a solicitor of your choosing. 

    Once you have chosen the equity release provider and plan that is right for you, an estate attorney will assist you with the transfer and legal paperwork.

    The post-COVID laws dictate that you must have at least one face-to-face meeting with your solicitor4.

    How Do Lifetime Mortgages Compare to Home Reversion Plans in Equity Release?

    Lifetime mortgages and home reversion plans are the two primary forms of equity release.

    Lifetime mortgages allow homeowners to borrow against their property’s value while retaining ownership.

    Interest is rolled up, with the loan and interest repaid when the home is sold, usually on death or moving into long-term care.

    Home reversion plans involve selling a portion or all of your home to a provider in return for a lump sum or regular payments, with the right to remain living there.

    While lifetime mortgages maintain homeownership, home reversion plans do not, representing the fundamental difference between the two.

    What Is the Application Process for Equity Release?

    The application process for equity release typically involves initial research, followed by consultation with a professional adviser who can provide a personalized recommendation.

    The next steps include choosing a plan and completing an application, which is submitted to the provider for approval.

    A property valuation is conducted to determine how much can be released. Upon approval, legal work is undertaken to ensure all parties’ rights are protected.

    The process concludes with the release of funds, which can be received as a lump sum, in installments, or as a combination of both.

    How Can You Choose the Right Equity Release Provider and Avoid Scams?

    Choosing the right equity release provider involves researching accredited firms that are members of the Equity Release Council, which ensures adherence to strict standards and protections.

    Look for providers that offer transparent terms, competitive interest rates, and favorable conditions, such as flexibility in repayments and the no negative equity guarantee.

    To avoid scams, steer clear of unsolicited offers and high-pressure sales tactics, and always seek independent legal and financial advice before committing to a plan.

    Does Equity Release Affect Your Welfare Benefits and Taxation?

    Equity release can impact your welfare benefits and taxation.

    Accessing a large sum of money may affect means-tested benefits, such as Pension Credit and Council Tax Support, by increasing your income or assets above eligibility thresholds.

    However, the money released is tax-free.

    It’s crucial to consult with a financial adviser to understand how equity release might change your tax position or eligibility for state benefits, ensuring you make an informed decision that aligns with your overall financial planning.

    Common Equity Release Questions Explained

    What's the Impact of Equity Release on Inheritance Tax in the UK?

    How Can Equity Release Help Reduce Your Inheritance Tax Burden?

    How Are Equity Release and Inheritance Tax Related?

    Do You Pay Inheritance Tax on Equity Release in the UK?

    Can Equity Release Minimize Your Inheritance Tax?

    What Is the Timeline for the Equity Release Process?

    What Should You Know About the Pitfalls of Equity Release?

    Can You Be Refused Equity Release and Why?

    What Are the Essential Facts About Equity Release in the UK?

    What Should You Know About the Risks and Benefits of Equity Release?

    What Is the Impact of Equity Release on Your Estate and Inheritance?

    Which Types of Equity Release Schemes Are Available?

    Can Equity Release Affect Your Pension and Benefits?

    Wrapping Up: Key Takeaways on Equity Release

    If you are still questioning if equity release is a sensible decision in 2024 after considering these equity release facts, The short answer is yes.

    If done correctly, equity release may be a good financial strategy to provide UK citizens over 55 with the funds they need for retirement.

    However, as noted in these equity release facts, you are obligated to obtain confirmation from a financial advisor before unlocking the wealth in your property.

    For equity release info, consult reputable financial sources for guidance.

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