What is 'equity release'?


Equity release is a way of accessing the wealth you have tied up in your property, without necessarily having to sell it. There are two primary types of equity release, 'Lifetime Mortgages' and 'Home Reversion Plans', both overseen by the Financial Conduct Authority for regulation.

All Equity Release products are required to be "advised sales" under Financial Conduct Authority regulations. This involves a qualified and authorised adviser gathering comprehensive information about your circumstances and needs, exploring all available options (including mainstream mortgages, Retirement Interest Only mortgages, and others), and then making a recommendation tailored to you.

Equity release can play a pivotal role in retirement funding. Plans adhering to the Equity Release Council product standards incorporate flexibility and safeguards, allowing many homeowners to access their housing wealth safely, and free from the burden of monthly repayments.

Am I eligible for equity release?

To be eligible for equity release, you must meet three straightforward criteria:

  • Be at least 55 years old

  • Own a property

  • Have a property valued at over £70,000

Additionally, your property and circumstances must meet the lender's criteria, which may include factors such as property type, condition, loan amount, and credit history.

How much can I borrow?


This will primarily depend on three things;

  • Your age (the amount will be based on the age of the youngest applicant for joint applications)

  • The value of your home

  • The plan you choose

Other factors may impact the amount you can borrow such as your current state of health.

Equity Release Calculator:

Have a look at our equity release calculator to get an idea of how much you may be able to borrow.

What alternative options are there?


Equity Release is a big decision, and certainly not one to rush into. Ensure you've considered all your options before deciding to proceed with Equity Release. Alternative options will vary based on circumstances but may include:

  • Downsizing: Selling your current property and purchasing a smaller one can release equity without taking out a loan. Downsizing can reduce living expenses, property maintenance costs, and release cash for retirement or other purposes.

  • Savings and Investments: Using existing savings or investments to cover expenses may be preferable to releasing equity from your home. Depending on the size and performance of your savings and investments, they could provide sufficient income for retirement without the need for equity release.

  • Retirement Interest-Only Mortgage (RIO): RIO mortgages allow borrowers over 50 to borrow against their property and pay only the interest monthly, deferring loan repayment until you sell the property, move into long-term care, or pass away.

  • Government Benefits: Investigate eligibility for government benefits or grants to supplement income or cover expenses in retirement. Depending on your circumstances, you may qualify for benefits such as state pension, pension credit, housing benefit, or council tax reduction, which can help alleviate financial pressure in retirement.

What is a lifetime mortgage?

A Lifetime Mortgage is an equity release product that involves taking out a type of mortgage on your property. A Lifetime Mortgage does not require you to make monthly repayments, although some products will allow you to make repayments rather than rolling up the interest. As with a standard mortgage, you retain ownership of your home with the loan and rolled up interest only payable when you pass away or move into long-term care. If you apply for a lifetime mortgage as a couple, the repayment is not made until the last surviving applicant passes away or moves into long-term care. This feature ensures that both applicants can remain in their home for the rest of their lives or as long as they need.

When you apply for a lifetime mortgage, you can choose to receive your funds in a tax-free lump sum or in smaller, regular payments. There may also be the option to borrow further funds as and when you want to, up to the maximum agreed with the plan provider.

We specialise in Lifetime Mortgages at Need Financial Planning.

Interest Roll Up Explained:

With a mainstream mortgage customers pay the interest due on a monthly basis. With a lifetime mortgage, the interest due is simply added to the mortgage account. This means that interest accrues over the term of the mortgage and can significantly impact on the amount owed over time.

Many lifetime mortgages now have a facility to allow payments to be made, which can alleviate this impact. This facility has been written into the Council’s Product Standards, so it must be included in all new products coming to market that providers wish to be Equity Release Council compliant.

What is a home reversion plan?


A Home Reversion Plan is an equity release product that allows you to access all or part of the value of your home while retaining the right to remain in your home, rent free, for the rest of your life. The product provider will essentially purchase all or part of your property and provide you with a tax-free cash lump sum or regular payments. At the end of your plan, your property is sold and the proceeds will be shared according to the ownership proportions.

We do not offer home reversion plan services at Need Financial Planning.

Can I take out equity release if I already have a mortgage?


Yes, you can take out equity release if you have a mortgage. However, the funds released must first be used to repay your existing mortgage. The remaining amount can then be used as you wish.

Will I be able to move home?


Yes, you can still move home with a lifetime mortgage. Most lifetime mortgages allow you to transfer the loan to a new property (also known as 'porting'), provided it meets the lender’s criteria and suitability standards.

Keep in mind there may be costs involved, such as valuation fees, legal services, and potential early repayment charges if you do not port the mortgage.

What are the risks of equity release?


In the past, equity release garnered a negative reputation due to unregulated practices and associated risks. However, significant regulatory changes have transformed the landscape, making equity release a viable option for many retirees. Despite these improvements, it's crucial to understand the remaining risks and considerations:

  • Impact on Inheritance: Releasing equity from your home may reduce the inheritance you leave behind for your loved ones, though safeguards are now in place to protect borrowers and their beneficiaries.

  • Interest Accumulation: While compound interest remains a factor, regulatory measures have ensured greater transparency and fairness in interest rates, reducing the risk of unsustainable debt accumulation.

  • Property Value Fluctuations: Despite the potential impact of property market fluctuations on home values, regulatory supervision has significantly enhanced consumer protection within the equity release industry.

    Notably, all Equity Release Council

    approved products now include a 'no-negative equity guarantee' as standard.

  • Impact on Benefits: Releasing equity may affect means-tested benefits, but regulatory reforms have introduced measures to minimise adverse effects and ensure borrowers are fully informed.

  • Early Repayment Charges: While early repayment charges may apply in some cases, regulatory standards now mandate clearer disclosure and fairer terms, providing borrowers with greater flexibility.

  • Seeking Independent Advice: Despite improvements, seeking independent financial advice remains crucial. Regulated advisers can offer tailored guidance, ensuring you fully understand the risks and benefits of equity release.

Could equity release affect my benefit entitlement?


You should certainly consider the potential impact on your benefit payments before proceeding with an Equity Release mortgage. It's advisable to consult the appropriate benefits agency to clarify any implications. Your equity release adviser can (and should!) also offer guidance on this matter.

Can you repay an equity release loan early?

Yes, you can repay an equity release loan early, but it may involve early repayment charges. These charges vary depending on the specific terms of your equity release plan and can sometimes be substantial. Before deciding to repay early, it is essential to:

  • Review Your Plan's Terms: Check the conditions outlined in your equity release agreement regarding early repayment.

  • Consult Your Provider: Speak with your equity release provider to understand the exact charges and implications.

  • Consider Financial Impact: Evaluate whether the benefits of early repayment outweigh the costs involved.

For tailored advice, it is advisable to consult with a financial adviser who specialises in equity release.

What is the Equity Release Council

The Equity Release Council is a trade body that represents the equity release sector. As members, we adhere to their strict code of conduct, which is designed to protect you, the consumer. Being part of the Equity Release Council demonstrates our commitment to maintaining high standards of professionalism, transparency, and ethical conduct in all our dealings with clients. It provides you with peace of mind knowing that you are working with an adviser who is bound by industry-leading standards and dedicated to providing you with the best possible advice and service.


THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.IMPORTANT: With investments, your capital is at risk. Pensions and investments can go down in value as well as up, so you could get back less than you invest.

Need Financial Planning Ltd is registered in England and Wales no. 10901658. Registered office, 123 High Street, Broadstairs, Kent, CT10 1NQ. Authorised and regulated by the Financial Conduct Authority. Need Financial Planning Ltd is entered on the Financial Services Register https://register.fca.org.uk/ under reference 977136. If you wish to register a complaint, please write to [email protected] or telephone 01843 228800. A summary of our internal complaints handling procedures for the reasonable and prompt handling of complaints is available on request and if you cannot settle your complaint with us, you may be entitled to refer it to the Financial Ombudsman Service at www.financial-ombudsman.org.uk or by contacting them on 0800 0234 567.

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