Equity Release

How to raise cash against the value of your home

Many elderly people face a tricky financial dilemma. Their home may be worth tens or even hundreds of thousands of pounds, yet they are forced to scrape by on a tiny income.

This dilemma is sometimes described as asset rich - cash poor. The soaring UK property market in recent years has left the over-60s living in properties worth an estimated £500 billion. But the basic state pension is barely adequate and those who cannot top it up from their savings and investments often find life is a constant financial struggle. A scant reward for a lifetime spent working.
 
Many mistakenly assume the only possible way to solve this dilemma is to sell their home. Understandably, few wish to take such a drastic step. But there is another solution, which is increasingly popular. A number of financial plans known as equity release schemes allow you to turn the equity in your property into cash in your pocket. It is your money, and it may make sense to use it to improve the quality of your life.

Turning property into cash
Equity release schemes are available from a number of different financial companies, some of them household names. Different schemes work in different ways, but all work to the same basic principle. They allow you to access the untapped wealth in your home to provide an income or lump sum to spend as you wish-without selling your home. Schemes may even allow you the freedom to move home afterwards if you wish.
Put simply, most equity release schemes work by allowing you to borrow money against your home, then repay the loan from the sale proceeds of that property on death.

These schemes are not for everyone. But careful planning and independent advice can help you decide whether you want to turn your bricks and mortar into much-needed cash.

Why choose equity release?
Equity release schemes are only appropriate for those who have passed a certain age and cannot raise money from other sources. The older you are, the more you will benefit, as the money you raise from the scheme will not have to last as long. Those aged 70 and above will benefit most. People use the money raised from equity release schemes for a host of reasons. Many are struggling on the basic state pension and simply want to boost their standard of living. It makes little sense to struggle financially when you own a valuable asset.
Others want the cash for a specific reason, to decorate their home, buy a new car or pay for a dream holiday. Some want to help their loved ones, perhaps by helping their children put a deposit on a place of their own or start a business.

What schemes are available?
There are different types of equity release plan offered by a number of banks, insurance companies and specialist lenders. All share the same principle of unlocking wealth in your home to spend as you wish, but they work in slightly different ways.
 
Is it right for you?
Your house is almost certainly the most expensive asset you own and you are likely to have a large emotional as well as financial stake in your home. You must therefore consider carefully any decision you make. Releasing equity from your home generally involves handing part of its value to a third party. On some schemes, you will give up all ownership rights, although will still be able to live there.
 
What next?
Unlocking capital in your home is a major step. There are many personal and financial issues to consider. The range of different plans available from different companies makes the picture seem even more confusing. Do not take such an important decision without first seeking an independent financial adviser who specialises in this area.

You should also talk to those family members close to you. Their financial interests are also at stake. They may be required to sacrifice a large part of their inheritance if you opt for an equity release scheme. It is best to tell them your plans, so the news does not come as an unwelcome shock later.
 
This factsheet has been approved by a person regulated by the Personal Investment Authority. Not all the mentioned products and services are regulated by the PIA. Eligibility for any of the above products and the tax situation will depend on individual circumstances. Remember that if you release your equity from your home you are still responsible for insuring the house and for payment of all household bills.
 
Written details on request. Equity Release:- Check that this mortgage will meet your needs if you want to move & sell your home or you want your family to inherit. If you are in doubt seek legal advice.