1. What is equity release?
Equity release is available to homeowners aged 55 and over. It’s a way to unlock money tied up in your home – without having to move or downsize to a smaller, cheaper property. The money you release is tax-free, and it’s yours to spend as you wish.
2. How does equity release work?
First of all, the ‘equity’ in your home is the difference between the market value of your property and the mortgage (or other debt) you have against it. The amount of equity you have in your home can go up as you pay off the mortgage (or other debt). If property prices rise, the amount of equity you have in your home can also increase.
3. What types of equity release plan are there?
There are two main types of equity release plan to choose from:
Lifetime mortgage – This is the most popular type, where a loan for an agreed amount of tax-free money is secured against your home. There are no monthly repayments and you retain full ownership – and repay the loan and interest when your home is sold or you go into long-term care.
Home reversion plan – You sell part or all of your home in return for tax-free cash. And you can live there rent-free until you pass away or move out permanently (for example, into care).
4. How much equity can I release?
Well, the exact amount will depend on your circumstances and the type of plan you take out. When deciding how much to offer you, equity release providers will look at how much your property is worth and how old you are when you take out your plan.
As a rule of thumb, you can usually expect to release between 20% and 50% of the equity in your home. And generally speaking, the older you are, the more money you can release.
5. How much does equity release cost?
There are usually some initial charges and fees to set up your equity release plan, depending on the provider you choose. These can include:
- Advice fee
- A valuation fee (to value your property)
- Your legal costs (your solicitor will give you a breakdown of these)
- Buildings insurance (to make sure you meet your lender’s requirements) – if you don’t already have this in place
Typically, these can add up to between £1,500 and £3,000. Make sure you ask your advisor about these costs before making any commitments.
6. How long does equity release take?
The timeframe varies from provider to provider. But it normally takes around 8 to 12 weeks – from the day the provider receives your application to the day your solicitor sends you your money.
7. Will equity release affect my family's inheritance?
Yes, it will. With a lifetime mortgage, you get a tax-free lump sum or regular cash payments – and your loan plus interest is repaid when you pass away or move into permanent care.
The money is usually paid back through the sale of your home – and that means your family won’t be able to inherit your property. However, any money left over from the sale can be passed on to your loved ones.
There are also other ways to make sure you do leave an inheritance. You can choose to ringfence some of the value of your home to leave as a legacy – just make sure you talk to your advisor when you meet them for the first time, and they can help you with a suitable plan.
8. What happens to equity release when you die?
That depends whether you have a joint equity release plan (in yours and your partner’s name) or an individual equity release plan (in your name only).
Joint equity release plan – You and your partner have the right to live in your property until the last remaining partner passes away or moves into permanent care. After this, the home is sold and the loan is repaid.
Individual equity release plan – When you pass away or move into permanent care, the home will be sold to repay the loan (unless your partner can afford to repay the provider in full). You should always get professional advice before making these kinds of financial decisions.
9. Can I release money from my house?
If you’re a UK homeowner aged 55 or over, then you could release money from your house with equity release.
You can find out about your eligibility by calling The SunLife Over 55 Equity Release Service on 0800 633 5566.
10. Is equity release a good idea?
If you find yourself with equity in your home but limited funds for your retirement, equity release is a potential solution. Equity release means you can:
- unlock tax-free cash from your property
- stay in your own home
- spend the money as you wish
Today, the equity release market is regulated by the Financial Conduct Authority (FCA), so you can have peace of mind that it’s safe and you have protection.
That said, it’s important to bear in mind that equity release isn’t right for everyone. And you should make sure you consider alternative options to fund your retirement too – including using your savings and downsizing.
Finally… make sure you seek advice
Just like any financial decision, equity release is a big commitment. So take the time you need to consider your options and decide whether or not it’s right for you. You should seek advice from an independent expert advisor to make sure you fully understand what’s involved with equity release. And The SunLife Over 55 Equity Release Service is here to help you do that.