What do you need to know about Equity Release?

By David Wright

Many people find themselves asset rich and cash poor.

Despite the slump in the housing market they live in a property that is worth more than they could have imagined.

Equity Release can provide money for home improvements, repay debts, the holiday of a lifetime  whatever you want to make your retirement more enjoyable.

What is Equity Release?

Equity Release is a way for homeowners aged 55 and over to release some of the money tied up in their properties, usually with no monthly repayments.

There are two main types; a special type of mortgage known as a Lifetime Mortgage where you continue to own your home but instead of making a monthly payment, the interest rolls up.

A Home Reversion involves selling some or all of your home to an Equity Release company. As there is no rent or interest to pay they buy your home at a substantial discount. These plans typically start at age 65.

How should you approach Equity Release?

Equity Release is a big decision and needs to be approached in the right way.

Seek independent expert advice. Choose an adviser who specialises in Equity Release and who offers whole of market advice on both Lifetime Mortgages and Home Reversions. This means your adviser can discuss all options with you and will shop around on your behalf.

If you see an adviser from a bank or insurance company they are almost certainly only able to recommend their own company’s plan. Getting the best plan in these circumstances could be down to luck more than judgement.

Safety First  make sure your adviser advises on plans from members of SHIP (Safe Home Income Plans). SHIP is a trade body of Equity Release providers and their members provide important legal safeguards.

Think carefully about how much you want. It is surprising how many people guess and ask for a round figure without having thought it through. When we sit down and discuss what they need and why, this amount often comes down.

Taking the right amount saves money in the long run and leaves more for later on.

Involve your family  this is of course optional but to be encouraged. Many people find it helpful to have the support of their family, especially if the whole prospect of seeing an adviser seems a bit daunting. Your adviser won’t mind, in fact they should welcome it.

Educate yourself. Before seeing an adviser it is well worth reading up on the subject. Free Equity Release guides are available from the Financial Services Authority and from most specialist advisers.

Consider the alternatives

Equity Release is just one option and you should consider the following:

• Downsizing  could you sell your present home and buy a cheaper one?
• Using other assets  do you have savings or investments you could use first?
• Mortgage or other borrowings  could you raise a normal mortgage or loan?
• Family assistance  could your family lend or give you some money?

In summary

Contrary to some media coverage, Equity Release is nothing to be scared of. Following these suggestions should ensure that you are informed and well advised.  Equity Release can be life changing. The feedback I have had from many clients is testament to that.

David Wright is Managing Director of specialist Equity Release advisers Sixty Plus.

For more information call 0800 018 5753.
email: david@sixtyplusonline.co.uk
or visit:

http://www.sixtyplusonline.co.uk