More and more people are reaching retirement and realising their pension isn’t providing the standard of living they had hoped for. If you are looking for a way to access either a lump sum of cash or boost your monthly income, equity release might provide the money you need.
When you own your own home, equity release allows you to take cash from your property to fund your life, without having to move or downsize. If this is a path you are considering you probably have a number of questions. Here are some answers to the most common:
–Do I have to have paid off my mortgage?
No, you don’t have to have paid your mortgage off completely, although you will be expected to settle the outstanding balance with the money you access through equity release.
–Will I still be the property owner?
This depends upon whether you embark on a lifetime mortgage or home reversion plan. With a lifetime mortgage you remain the property’s owner and take out a loan secured against your home. The balance of the loan, including interest, is settled upon the sale of your property – usually upon your death or if you move into a residential care home.
With a home reversion plan you actually sell a proportion of your property. For example, if you sell 25 percent and release the equity or this proportion, you will remain the owner of the other 75 percent. You will still be able to stay in your house until you and your partner either move to a long term care home or pass away.
–Will I still be able to leave an inheritance to my family?
Yes, although there will be a reduction in the amount you will be able to leave. If you intend to leave money to your loved ones you should discuss your requirements with an expert in equity release before signing up. They may advise you to take out a home reversion plan, which enables you to guarantee that the proportion of the property you don’t sell will be left as inheritance.
–Is it possible for me to lose my home with an equity release plan?
No – as long as you choose a reputable provider and a safe plan. Look out for equity release schemes approved by the Equity Release Council and regulated by the Financial Services Authority (FSA). Plans recommended by these bodies ensure you and your partner can remain in your home until you pass away or move into care.
The Equity Release Council will also protect you with the ‘no negative equity policy’, which ensures you never owe more than your home is worth.
Can I move house?
–Yes. Plans approved by the Equity Release Council provide extra protection, enabling you to move to another property without being charged a fee – there may be certain criteria required so check the terms and conditions of your policy before you sign up. You also have the right to remain in your current home for as long as you choose.
Making the decision to release equity from your property can be a difficult one; make sure you take expert advice before embarking on a plan. However, this is often a worthwhile option for anyone looking for a way to boost their income and standard of life in their golden years.