Equity Release 

For many homeowners, their property is their biggest asset. Unlocking this value by doing equity release is an option being considered by an increasing number of over 55’s to help financially plan for their retirement. 

Equity can be released via a lump sum or in stages with a drawdown facility to help provide an additional source of funds in later life, with a growing choice of product features and flexibilities. Some people take equity release because they do not have adequate savings and they need extra money to meet living expenses or simply want to improve their lifestyle. 

Some of the things equity release can be used for include: – Adapting and improving a home so the owner can live in it independently for longer – Paying off debts, such as outstanding mortgages, credit cards or personal loans – Making up pension shortfalls, increasing disposable income and providing a better quality of life – Keeping your own home for longer by paying for help around the home, including domiciliary social care – Buying a new car or other lifestyle purchases such as holidays – Helping a child or grandchild through university or with a house deposit. 

Equity release is the umbrella name for products that provide clients with a way of releasing the wealth tied up in their property, without necessarily having to sell it and move to another home. There are two main types of equity release and both are regulated by the Financial Conduct Authority.

Lifetime Mortgage

The most popular type of equity release is a lifetime mortgage. When clients take out a lifetime mortgage, they retain full ownership of their home and any interest on the loan can be paid as you go along or rolled up with nothing to pay until the end. The loan and any outstanding interest are then repaid by your estate when you either die or move to permanent long-term care (or in the case of a couple the last person living in the home.)

The amount available to borrow depends on things like a client’s age, their health and how much their property is worth. Lifetime mortgages are usually only available to people aged 55 and over. 

Home Reversion Plan 

When a client takes out a home reversion plan, they sell all or part of their home in exchange for a lump sum or a regular monthly income, while retaining the right to remain in it, typically rent free. You will know precisely what portion of your property you have parted with and, equally, what has been ring-fenced for later use, if that is what you have decided to do, possibly to leave in a will*. The percentage you retain will always remain the same regardless of the change in property values, unless you decide to take further cash releases. At the end of the plan your property is sold, and the sale proceeds are shared according to the remaining proportions of ownership. 

Much like a lifetime mortgage, the amount of money a client can raise depends on things like a person’s age, their health and how much their property is worth. Home reversion plans are usually only available to people aged 60 and over.

Later life Lending 

There are other types of later life financial products. These include products such as retirement mortgages and retirement interest-only (RIO) mortgages. It is recommended that you speak to your adviser and seek information on all options to ensure any product you choose best suits your needs, both now and in the future. 

Equity release is a lifetime mortgage or home reversion plan. To understand the features and risks associated with such products, please ask for a personalised illustration

* Will writing involves the referral to a service that is separate and distinct to those offered by St. James's Place. Wills are not regulated by the Financial Conduct Authority.