Equity release can be quite an attractive way to give yourself an additional income when you retire. This is because it allows you to release some of the value that is tied up to your home as a tax-free lump sum. Here’s why and how to release equity from your property…
Considering equity release for your home
For some people, the money they receive is used for things such as home renovations, paying off debts or other plans for a more comfortable and enjoyable retirement. It is also common to use the money for buying an annuity or invest elsewhere to bring in a regular income.
If you are considering applying for equity release on your property, there are a few things you should be aware of…
What type of equity release should I choose?
It’s important to start by understanding the two main types of equity release. These are:
- Lifetime mortgages
- Home reversion plans
Both of these options give you the opportunity to release money from your home as a lump sum. Where they differ, however, is the conditions that come with each option.
A lifetime mortgage allows you to take out a tax-free loan that is secured against your home. This loan will only require repayments upon your death when the property is sold. Unlike a standard mortgage, the majority of lifetime mortgages do not require a monthly interest payment. This is because the interest is “rolled up” and added to the amount that must be repaid with the mortgage. This type of mortgage allows you to retain full ownership of your home.
Home reversion plan
A home reversion plan is where you have the choice of selling all or part of your home to a mortgage company. However, you will retain a guaranteed lifetime release, which means you can stay in your home until your death. Choosing this type of equity release provides you with a lump sum to spend however you wish, without the need to make any repayments.
When you pass away, your home will be sold, allowing the lender to recover the loan. If you only sell part of your home under the home reversion plan, the remaining value will be passed down to your heirs.
When to take the money
Many equity release plans come with a drawdown option. In other words, the money that is released is put in a pool by the lender, allowing you to withdraw the money whenever you need. You will then only need to pay interest on the money you have already withdrawn. This means that you will have access to all the money while allowing you to reduce the amount of interest you pay.
The impact on your estate value
No matter the type of equity release you choose, you will essentially reduce the value of your estate left to your heirs upon your death. Therefore, you should consider all of your options and discuss this with your chosen beneficiaries. This will make them aware of the situation and not left with less than their expectations.
Get the best conveyancing for equity release
At Betesh Middleton Law, we are here to provide homeowners in Greater Manchester with high-quality conveyancing services. Our highly experienced team are here to provide you with a safe, reliable conveyancing service that will give you peace of mind when it comes to your property. Get in touch to find out more.