What are the advantages of an equity release mortgage?
Many homeowners are asset-rich but cash-poor, and equity release is a great way for them to release capital from their property without having to sell up.
What is equity release?
When a person takes out an equity release mortgage, they are securing a loan against the current value of their home. They will then receive either a lump sum or monthly instalments of tax-free funds deposited into an account of their choice to spend however they wish.
Why are more people choosing to release equity?
Increasingly, homeowners aged over 55 are choosing to release equity as a way of supplementing their income. As the cost of living continues to rise, many retirees are finding that their pensions are feeling squeezed and that extra help from equity release allows them to continue to live comfortably.
People also choose equity release to help support their loved ones. With many grandparents gifting grandchildren with money to help get them on the property ladder. With the cost of first-time properties averaging at over £250,000 and wages stagnating, equity release is proving necessary for a growing number of people.
How does equity release work?
Equity release allows homeowners to take a percentage of the value of their property and turn it into a liquid asset. You can then use the money in whatever way you see fit. It could be making alterations to your home, which could increase the value of the property, you could use the money to go on holiday, or it can be used to pay for on-going care or treatment.
Typically, the secured loan is paid back when the borrower moves into long-term care or dies, and the money is recouped following the sale of the property.
Key benefits of equity release
- You still retain the full ownership of your home
- You don't have to move to release cash
- Many lifetime mortgages enjoy a 'No Negative Equity' guarantee ensuring the amount owed is never more than the value of the property
- There's no timescale for repayment, it's paid back when the last borrower leaves the home (usually by moving into long-term care or when they die)
- It's possible to sell the house and 'port' the lifetime mortgage
- You can pay off the loan early
- You can spend the money on whatever you want
- It can help reduce the value of your estate, which can reduce Inheritance Tax liability
