An Introduction to Equity Release
What is "equity release"?
Equity release is a term used to describe the various ways you can financially benefit from the value of your home. Equity release enables you to raise capital, income or a combination of the two while continuing to live in the property, you will be free to use the monies however you wish i.e. for home improvements, a much longed for holiday, to help maintain or increase your standard of living in retirement.
As more and more people need to face the need for care, equity release is becoming a popular and realistic way of enabling people to receive formal care in their own homes, delaying or preventing the move in alternative accommodation.
If you are in your fifties or older and own your own home outright or are close to doing so, equity release schemes can be extremely helpful, however they are not suitable for everyone. Taking a lump sum from the value of your home, plus associated legal costs will reduce the amount of equity owned by you, which will have a knock-on effect on any inheritances you may wish to leave. Equity release schemes can be seen as expensive and inflexible, especially if your personal circumstances unexpectedly change in the future.
Symponia recommends that you seek professional independent advice from a specialist solicitor and a Financial Services Authority (FSA) authorised and regulated adviser before proceeding with any type of equity release scheme.
The advisor should have obtained both CF7 and HR1 qualifications; alternatively from September 2007 they may have achieved the newer combined qualification named ER1.
In order to discuss all forms of equity release a financial adviser must have these qualifications. Satisfy yourself that they have the necessary experience to advise on all aspects of equity release schemes before you proceed.
Factors to Consider:
Equity release is only one of a number of ways in which you can raise capital or income. There may be other options available to help you. We recommend that you consider all of the options available to you, before you proceed with an equity release scheme, other solutions may be more appropriate for your individual needs, and it is important for you to consider all of the following:
- Your current or future entitlement to state benefits i.e. Income Support and tax allowances such as Pension Credit and Council Tax Benefit may be affected by equity release.
- You may have existing savings and capital that could be used to generate additional income or provide a lump sum, if this is the case you should seek independent financial advice about the best way to utilise this money.
- Moving to a less expensive, smaller or newer property (known as downsizing) may release the equity (value) you require.
- If you are looking to raise a lump sum to pay for home improvements or adaptations to your home you may be eligible for financial assistance from your local authority or from other organisations.
- If you are in difficulty managing or repaying debt you may want to take advice from the National Debtline or your local Citizen Advice Bureau.
- Make sure you have contacted any private pension schemes to which you or a previous employer may have contributed, in case they hold deferred benefits. The Pension Tracing Service can usually help by tracing it for you. You can call them Monday to Friday from 9am to 5pm on 0845 6002 537 or discuss with your Symponia Member.