As you enter later life, you may find you need additional sources of income. Many people at or near retirement find themselves on a low income while living in a house with a high value. A possible solution is to release some equity from your home, giving you money to spend while allowing you to carry on living there.
Equity release is typically only available to you if you are over 55 and own your own home outright (without a mortgage or other loan secured on it). It is a major decision so should never be taken without independent professional advice.
How does it work?
There are two types of equity release schemes; lifetime mortgages and home reversion. The amount you can borrow depends on your age and the value of your home, and typically the older you are the more you can borrow.
This area can be tricky to navigate, so the SHIP Standards Board (now part of the Equity Release Council) has set a code of conduct. SHIP stands for Safe Home Income Plans and those who sign up to it have to undertake that you have the right for you to live in your property for life, and the freedom to move to an alternative property without penalties. Other rights include being able to choose your own solicitor to review the documents, which must be ‘fair, simple and complete’. The standards also mean that ‘negative equity’ cannot be applied – so even if your house should decrease in value, your estate will not be required to repay any additional debt after your death. When you speak to your adviser, make sure the proposal you are being offered does carry the Equity Release Council logo – which means that it complies with these standards.
Equity release can affect not only you but your family and other beneficiaries, so you should never act in haste. An indepedent financial adviser will be able to explore all the options with you and help you make a decision. You can find a local IFA here.
Questions you might like to ask a financial adviser:
- How much of my home would I still own?
- What scheme would suit me better, home reversion or a lifetime mortgage?
- Are there other ways I could access money, without using equity release?