If you have been watching the value of your home increase over the years and noticed the growing number of adverts for equity release in the media, then you might be wondering if this could make life a little easier financially for you. Or maybe, you would like to go travelling and are tempted to release some of the hard-earned cash tied up in your home.
But what exactly is equity release?
Who is eligible to sign up for such a scheme and what are the possible pitfalls involved? Peter Watkin, a Chartered Legal Executive at Rundlewalker explains.
Equity release is a way of accessing some of the equity locked up in the value of your home and there are a couple of different schemes available which a Financial Advisor would advise on.
At Rundlewalker, we only deal with the more common type of scheme, a lifetime mortgage. They allow you to withdraw some of the equity in your home via either a one-off cash lump sum, or through smaller ‘drawdown’ sums over time.
There are usually no monthly repayments unless you choose to make them; interest on the sum borrowed accrues and you pay off this and the amount borrowed when you die or your home is no longer your main residence (for example, if you move into long-term care).
In general, to be eligible to sign up to an equitable release scheme you must:
There are obvious benefits to equity release, such as having a cash-rich retirement, allowing you more freedom to do what you want to in later life, while still retaining ownership of your home.
Pitfalls to look out for
There are drawbacks, the most obvious being that there will be less money to leave to your loved ones when you pass away, and they are unlikely to be of use if you rely on means-tested benefits.
The first step is always to talk through you plans with a qualified Financial Advisor, experienced in equity release. They may be independent, or they may be tied to a particular scheme provider. An independent financial adviser will be regulated by the Financial Conduct Authority, and will discuss your needs and assess whether equity release is right for you, what alternatives you might want to consider and highlight with you pitfalls such as: early repayment charges; penalties applicable if you decide to downsize; bars on you moving completely; and whether the maintenance and insurance requirements associated with the scheme are too onerous.
We also advise that before you commit yourself to anything, that you discuss your plans with your family. There may be alternatives that you have not thought of, and your family may be able to provide valuable advice and reassurance.
How our solicitors can help
Once you have chosen an equity release scheme which is right for you, you should then speak to a specialist legal adviser who will explain the legal consequences of the plan you have chosen, and the conditions and restrictions associated with it.
For a confidential discussion, please contact Peter Watkin on 01392 209204 or email email@example.com at Rundlewalker on Exeter’s historic Quayside.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.