A Simple Guide to Understanding Equity Release Policies

Are you considering whether equity release is the right option for you? As you get older, downsizing to a smaller property isn't always ideal, particularly when you have strong roots in your community.

This blog post will explore the different equity release policies and outline the potential pros and cons of equity release to enable individuals to make an informed decision about whether it could be the right choice for them.

What Is Equity Release?

Equity release is a way to access money that is tied up in your home without having to sell it or pay off your mortgage. This option is only available to homeowners of a certain age, with the amount you can sell or borrow depending on the value of your home.

Lifetime Mortgage

As the more common form of equity release, this mortgage is like a home loan that enables you to borrow money against your home. The loan and any accrued interest get paid back after the individual has passed away or is moved into a long-term care facility. For a lifetime mortgage, homeowners must be 55 years old or older.

Home Reversion Plan

This plan enables the owner to sell all or a part of their home while they are still living in it. The house is usually sold at below-market value in return for a tax-free lump sum or income stream. Once the individual dies or is moved into a permanent care facility, the house sale is completed. For a home reversion plan, homeowners need to be at least 60 years old.

The Pros and Cons of Equity Release

Pros of Equity Release:

●     Access to Funds: Provides retirees with a lump sum or regular income, helping cover expenses to live more comfortably.

●     Stay in Your Home: Allows homeowners to remain in their property without the need to sell their home or downsize.

●     No Monthly Payments: Typically, there are no monthly repayments because the loan is repaid when the homeowner passes away or moves into long-term care.

●     Flexible Options: Various plans, including lifetime mortgages and home reversion plans, cater to different financial needs and circumstances.

Cons of Equity Release:

●     Reduced Inheritance: The loan amount and accumulated interest significantly decrease the estate's value, leaving less for heirs.

●     Interest Accumulation: For lifetime mortgages, interest compounds over time, which can quickly reduce the remaining equity in the home.

●     Costs: Initial set-up fees can make equity release expensive.

●     Impact on Benefits: Receiving funds from equity release can affect eligibility for means-tested state benefits.

●     Complexity: The terms and conditions can be complex and difficult to understand, requiring professional financial and legal advice from conveyancing solicitors.

Interested in Equity Release? Contact Conveyancing Solicitors in Torquay

If you wish to go ahead with equity release, you'll also need to arrange for legal advice from a conveyancing solicitor. At Almy & Thomas, our expert property solicitors will ensure you understand the ins, outs and implications of equity release so you can rest assured you are making the right decision. To book a property conveyancing consultation in Torquay, contact Almy & Thomas.