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This article was published on April 2nd, 2020
For those later in life, contemplating a more comfortable retirement or looking to help a loved one by providing financial support, or seeking to bolster their own finances following an unforeseen event, equity release provides an opportunity to receive a cash injection by releasing equity tied up in your home or property.
In this blog post, our conveyancing experts outline the things you need to consider when deciding whether or not it is right for you.
Before we dive into the things you need to know when considering equity release, it’s important you have an understanding of what it actually entails.
The key function of equity release is to utilise the value of your property and transform part of it into a lump cash sum or staggered cash payments.
Whilst equity release may sound appealing to people of all ages, only those who are aged 55 and over are eligible to take advantage of it.
There are two forms of equity release, which form is correct for you will depend on various circumstances which we’ll cover later.
The first form that equity release can take is that of a lifetime mortgage. This enables the owner of a property to borrow a proportion of the value of their home at a fixed interest or capped interest rate. The amount borrowed is a cash lump sum in the form of a mortgage, which is paid off when you pass away or you move into long term care.
If you enter into an agreement with your spouse, then the mortgage will be repaid once both of you have either passed away or you have both moved into long term care.
The second type of equity release is Home Reversion.
This option requires you to sell part or all of your home to a reversion provider in exchange for a cash lump sum or regular payments.
This option also enables you to ringfence a portion of your property for use later on, such as to provide an inheritance for your loved ones who you leave behind.
Upon your death or when you move into long term care, your home will be sold and the money will be distributed among those with ownership, e.g. you, your spouse and the reversion provider.
This is something our clients often ask us. This type of transaction is safe as it is regulated by the Financial Conduct Authority and many providers are also members of the Equity Release Council, who are responsible for establishing the standards for the various schemes.
The standard set out by the Equity Release Council offer protection by ensuring:
As we’ve highlighted so far, there are a number of factors to take into account when considering equity release. Below we have put together a brief summary of the key pros and cons that you should assess before making your decision.
If you’re considering equity release, or you would like to know more about how it could benefit you or whether it is the right option for you, our property law experts are here to help.
Our conveyancing team have a wealth of experience in handling all types of property transactions including equity release and will be happy to guide you through the process, providing essential advice at each stage of the transaction to ensure your best interests are always the priority.
To speak to a member of our team, please call 0330 058 0118 or complete our online enquiry form and a member of our team will get in touch with you.
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