Equity release is a way of accessing part of the money tied up in the value of your home without you having to move house. You can receive the money you release as a lump sum, in several smaller amounts, or as a combination of both.
There are two primary types of equity release: Lifetime mortgages and home reversion plans. To be eligible for either of these options, you will need to meet certain qualifications including:
- Age: For a lifetime mortgage, you must be at least 55 years old. For a home reversion, you need to be at least 60 years old.
- Your home: You must own your home and it must be your main residence. There are other criteria that tend to vary between equity release providers, but in general, the property must be a certain value and must be in reasonable condition.
- Your family: If you live with any dependants they may need to sign a waiver confirming they understand they don’t have a right to continue living in the property if you die or move into permanent residential care.
Let’s examine how lifetime mortgages and home reversions work and how you can benefit from each.
Lifetime mortgages are the most common type of equity release. It’s a type of loan secured against your home that allows you to release funds from the property, tax-free. With a lifetime mortgage, you continue to live in and own your home and are responsible for its maintenance and insurance.
The maximum amount of the loan depends on your age, the value of your home, and in some cases, your health. You can normally borrow up to 60% of the value of your property. The percentage typically increases based on your age when you take out the lifetime mortgage
Usually, the mortgage does not need to be repaid until the last borrower dies or moves into permanent residential care. Interest is added to the loan but is usually rolled up until the loan is repaid. Interest rates must be fixed or, if they are variable, there must be an upper limit that is fixed for the life of the loan.
Advantages of Lifetime Mortgages
Here are some of the biggest benefits of choosing to go with a lifetime mortgage:
- You can get a tax-free lump sum and/or smaller, regular payments to supplement your income in retirement.
- You are still able to live in your home until you die or move into permanent residential care.
- You can continue to benefit from any rise in the value of your property.
- You are still able to change homes and the product can be transferred to a new home. Be aware that you can only do this if the new property acts as acceptable security to the mortgage provider.
- For most lifetime mortgages, there is no need for regular payments.
- The product has a “no negative equity guarantee” – meaning that when your property is sold, 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.
Advice on Equity Release
Elizabeth Middleton Solicitors offers the legal expertise you need to plan for the future and protect your assets. We understand that everyone’s circumstances are different and our friendly and approachable legal team works to develop wills, lasting powers of attorney, and tax and estate planning suited to your unique needs.
Contact us today to learn how our services can help you and your family prepare for the future and protect your estate.