Unlock tax-free cash from your home
If you’re in or approaching retirement and have owned your home for some time, chances are you’ve benefited from the dramatic rise in UK house prices over recent years. So now you’re living in your most valuable asset, but your pockets are no deeper because the money is actually tied to bricks and mortar. If this sounds like you, equity release can help you unlock some of the cash tied up in your home, without you having to move out.
With more of us living longer, retirement has become a new phase in life to hopefully be enjoyed for many years. An exciting prospect but also a potentially challenging one when it comes to money.
Releasing some of the equity in your home can give you a tax-free lump sum or smaller cash injections to top up your retirement income.
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Types of equity release schemes
You borrow against the value of your home while you continue to live in it. You don’t have to make repayments, instead interest is added to the mortgage and both are repaid when the property is sold.
You sell all or part of your home at a reduced price and, in exchange, live rent-free for life in your home and receive a cash lump sum. It is worth noting that the sale price will be less than if you sold your property directly.
Home reversion schemes
Deciding which scheme works for you will depend on your current circumstances and your plans, including:
The value of your home
How much equity is available in your home
Whether you would like to leave an inheritance
Whether you want to retain ownership of your home
How does it work?
Here is a simple summary of how a lifetime mortgage works:
A lifetime mortgage is a loan secured on your property and is available to UK homeowners aged 55 and over
You can access some of the equity tied up in your home tax-free, while continuing to live there
Choose to take a one-off lump sum, or a smaller amount upfront with the facility to borrow more in the future
The total you can borrow will depend on your age, your health and the value of your home
You don’t have to make monthly repayments because the interest is added to the loan amount each year
The loan plus interest is repaid when the property is sold — typically, when you die or leave your home permanently (e.g. you go into long-term care)
What is a home reversion scheme?
Open to UK homeowners aged 65 and over, a home reversion scheme lets you sell part or all of your home in return for a tax-free lump sum or a regular income. The price paid by the scheme provider is below market value because you also get the right to stay in your home rent-free until you die or move out permanently.
At this point, your home will be sold and you or your estate will receive the sale proceeds, less the percentage share you sold to the equity release provider originally.
Home reversion scheme considerations:
House price fluctuations
If the value of your home has risen by the time it is sold, you or your estate will only benefit from the increase in your share of the property.
Important things you should know
Think carefully before borrowing against your home. You must always get professional advice from a specialist adviser, a lawyer or both
The interest added to a lifetime mortgage can build up quickly and increase the amount you owe
Releasing equity from your home will reduce the value of your estate and the amount you’re able to leave as an inheritance when you die
Equity release may affect your tax position and your entitlement to state benefits
The future market value of your home could be higher or lower than it is today
How can equity release help
Many people are living far longer than previous generations and have more time to make the most of their later years.
But living longer can put a strain on your finances and your retirement pot may struggle to fund the way of life you’ve worked so hard for.
Releasing some of the equity in your home could make life a little easier every day and help finance your future plans. It could also provide a living inheritance for your family.
A more comfortable retirement
If you only sell part of your home, you’ll know exactly what percentage of your home’s value will be left to your estate on your death.
If you die or move out permanently soon after taking out a home reversion plan, you may lose out because you have been paid below market value and not reaped the benefit of living rent-free for a significant period of time. However, some plans do provide some protection against this.
Clear outstanding debts
Adapt your home to your needs as you get older
Retire a little earlier than planned
Fund care at home
Top up your regular income
Pay funeral costs
Fund home improvements
Pay medical or legal bills
Help the family
Help children get on the property ladder or set up a business
Take regular holidays or the holiday of a lifetime
Pay education fees or living costs
Finance a new car or caravan
Finance a wedding or other family events
Fund leisure activities and hobbies
Reduce the inheritance tax burden
Treat yourself to something you’ve always wanted
Hello Mortgage Limited is registered in England and Wales. Registered Office: Suite 20, Cookson House, River Drive, South Shields, Tyne & Wear, NE33 1TL. Company Number: 10414170. DPA number ZA332902
Hello Mortgage Limited is an Appointed Representative of Ingard Financial Limited which is authorised and regulated by the Financial Conduct Authority 450731.
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