'How can I release money from my house?' You’ve probably heard there’s a way, but maybe you’re not sure how it works. It’s called equity release. And the good news is it’s simpler than you might think to unlock tax-free cash from your home to enjoy in retirement.
What is equity release?
We’ve written a handy article on how equity release works, but here’s a quick recap for you.
Your home is probably worth more than what’s left to pay on your mortgage. This difference between market value and loan value is called ‘equity’. It’s effectively cash locked up in your home – and there are a number of ways you can ‘release’ it.
Many people turn to equity release as a way of boosting the money they have available in retirement, preferring to access cash now rather than leaving it locked up in their property.
If you’re wondering how to release equity in your home, here are your options.
How do you release equity from your house?
A lifetime mortgage is the most popular way of releasing equity from your house. If you’re age 55 or over, depending on your age and house value, you could borrow up to 60% of the value of your home as tax-free cash – either as one lump sum or as smaller amounts over time.
Unlike a normal mortgage, you don’t have to make any monthly repayments. Instead, the interest is added to your loan and it’s all paid off through the sale of your home when you pass away or move into permanent care.
Find out more about lifetime mortgages and, if you think you might like to go ahead, we’ll put you in touch with an independent Age Partnership financial adviser who’ll explain everything first.
Other ways of releasing equity from your house
When we talk about equity release we usually mean a lifetime mortgage, but it’s worth taking a quick look at other ways to unlock the value in your home.
Downsizing essentially means selling your property, using your equity to buy a cheaper property and then cashing in on what’s left over once all costs are covered. The new property is yours to do what you want with and it can be left for your family to inherit when you pass away. Although, you should consider the following.
Cost of moving
Moving can often cost more than people think. A portion of the money you get from selling will need to be allocated to estate agent fees, legal fees, stamp duty and moving costs, which when added up can be pretty substantial.
If you’ve lived in your home for sometime, packing up and leaving your memories behind might be too overwhelming and stressful. It’s important to give yourself plenty of time to consider what’s best for you.
You could raise the lump sum of cash you need by remortgaging, where you’re essentially borrowing against the value of your equity. If your home’s gone up significantly in value since you bought it, accessing some of the value then looking for a better mortgage rate could be an option, particularly if you have a good regular income. But before you remortgage for extra cash, think carefully about two key factors.
Make sure you’re happy with the size of your new mortgage repayments as your home may be repossessed if you don’t keep up with your repayments. And what fees are there to exit your existing mortgage agreement and start a new one?
You will need to go through the standard mortgage application process and if you’re approaching retirement, lenders can be less likely to lend or you could be offered a mortgage on a restricted term.
Is a lifetime mortgage right for you?
Releasing equity from your house may be right for you if…
- You’re looking to use the value of your property to enjoy your home in retirement
- You want to boost your pension income, or benefit from a tax-free cash sum
- You want the security of knowing you’ll never owe more than the value of your home
You may want to explore other options if…
- You’d rather not reduce the amount of inheritance you could leave to loved ones
- You don’t want to affect your entitlement to state benefits – such as pension credit, savings credit or even council tax benefit
- You don’t qualify for a lifetime mortgage (it’s not available on all properties and you need to be age 55 or over)
SunLife offers a range of straightforward and affordable products including over 50s life insurance, funeral plans, life insurance, equity release, pet insurance, home insurance, car insurance, ISAs and Will writing services