If you have money tied up in your home, and you’d like to take advantage of some of that equity, you’re not alone.
Equity release – where you can access some of the value in your home as a cash lump sum – had a record year in 2021. Figures from the Equity Release Council reported by This is Money show that total lending in 2021 climbed to a record £4.8 billion, up from £3.86 billion in 2020.
Recently, we’ve added an equity release expert to the Altura team.
Kevin Curtis has more than 30 years’ experience advising clients on how to release cash from property, and has joined Altura to ensure all our clients and their families benefit from high-quality advice when it comes to releasing capital from their properties in later life.
Read on to find out more about equity release, and how Kevin and Altura can help you.
Equity release enables over-55s to release cash from their property
If you’re a homeowner, equity release lets you extract cash out of your property without the need to move home. To be eligible for equity release, you must be over the age of 55 and own your home, though you may not necessarily need to have paid off your entire mortgage yet.
The most common type of equity release is a “lifetime mortgage”.
A lifetime mortgage works by lending you money that is later repaid from the sale of your property when you move into long-term care or pass away.
While the loan accrues interest, you typically don’t have to make any monthly repayments, meaning the interest “rolls up” over time. The total interest is paid when the property is sold. Alternatively, you can make a monthly interest payment if you prefer.
There are lots of reasons why you might wish to release money from your home:
- To supplement your pension income and to help you to live the lifestyle you want in retirement
- To provide financial help to younger members of your family. For example, you may wish to gift or loan some money as a deposit so they can buy their own home
- To pay for one-off costs, such as adaptations to your home or other home improvements
- To make gifts to family and reduce the value of your estate before you pass away, helping to mitigate the effects of Inheritance Tax (IHT). IHT is only charged on the value of your estate above a certain amount, so reducing your estate can help you nullify or reduce your IHT bill.
Our new equity release expert, Kevin, says: “Over more than three decades I’ve met many ‘asset rich, cash poor’ clients. While they had plenty of money tied up in their home, it was largely useless to them as they needed to access the cash now to help family or to maintain the lifestyle they wanted.
“Equity release can be really beneficial to older clients, as it means they can use the value they have built up through years of property ownership. It can help clients to give a family member a leg-up onto the property ladder, pay for one-off expenses, and live the lifestyle they want because they have the income available to do so.”
Some things to think about if you’re considering equity release
As with other lending products, there are some things that you should consider before committing to equity release, as Kevin explains: “It’s important that anyone considering equity release makes sure it’s the right choice for them – and that’s where I can help out.
“My role is to talk clients through the pros and cons so they can make an informed decision about whether releasing equity is right for them.”
Factors to consider include:
- Equity release loans generate interest, just like any loan or mortgage. If you take out a loan and live for many years without paying off any interest, it’s likely that a significant amount of interest could accrue. This will reduce the equity in your home and mean you leave less to your beneficiaries.
- Interest rates on equity release can be more expensive than more traditional mortgages. So, if you can afford to make a monthly repayment then there may be other lending options that are more appropriate – particularly if you’re younger.
- As the money will be repaid when your home is sold, it is your responsibility to ensure that the home remains in good condition. So, you will have to consider the upkeep and maintenance costs of your home.
Kevin adds: “It’s also important to speak to your family about your plans and to manage their expectations. If you don’t, they may not realise that they may ‘lose’ some of their expected inheritance to interest repayments.”
Get in touch
If you, or a family or friend, is considering releasing some equity from their home, we can help. Email firstname.lastname@example.org or call us on +44 (0) 20 3411 0079.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Buy-to-let (pure) and commercial mortgages are not regulated by the FCA.
Think carefully before securing other debts against your home.
Equity Release will reduce the value of your estate and can affect your eligibility for means-tested benefits.