Let’s lay to rest some popular equity release myths… you can benefit from releasing cash from your property and you won’t lose your home.
While it’s not quite a case of ‘everybody’s doing it’, tens of thousands of people are realising that equity release brings many benefits. Most importantly, perhaps, homeowners continue to live in their home, maintain 100 per cent home ownership, and the cash lump sum they receive is tax-free.
You can choose to make monthly repayments or not, depending upon your own requirements and circumstances and the low rates of interest are fixed for life.
Property owners work hard for most of their lives and by retirement usually own their home outright. Those years of effort, and usually considerable equity, are tied up in their home, which probably represents their biggest financial asset.
For those aged 55 or over, equity release allows homeowners to release some of that equity and turn it into useful tax-free cash.
Low interest rates are one factor in the current strength of equity-release market conditions, meaning that homeowners could save thousands of pounds over the course of the plan. At the moment, house prices have risen above their 2007 peak, meaning that homeowners can release more money than before from their homes.
Indications that prices will continue to rise, with an expected increase of a further 30 per cent, offer welcome and encouraging news, meaning that with many equity-release plans 100 per cent ownership could be maintained, with homeowners benefiting from any further increases in the value of their property.
The message about equity release is getting through because a significant level of growth was recorded in the market in 2014. Flexibility was the key factor in this increase: product improvements and innovations gave customers greater flexibility and the opportunity to make more savings than previously. The over 55s were also using equity release to top up their under performing pension pots.
There is an expectation that 2015 will see an increase in new plans as other lenders enter the market, an increase in choice can be bewildering, but is also beneficial. It does, though, highlight the importance for anyone contemplating equity release, as a way of unlocking the cash in their homes, to seek independent, impartial advice so that they choose the best option for their individual circumstances.
As the equity release market evolves, those who have already taken out a plan can in fact, change it at any time and, as new plans become available. This year could be a good time for homeowners to request a free review, ensuring that they are benefiting from the best plan for their individual situation.
Ask ERIC, the Equity Release Information Centre, can provide a free brochure on equity release, which will answer many questions. Please telephone 0800 077 6885 to request a copy.
The centre can also provide information on other aspects of retirement planning. These are lifetime mortgages and home reversion plans. To understand the features and risks, do ask for a personalised illustration.