It is a fact people are living longer and many individuals are finding it more of a struggle financially. Decades of home ownership, coupled with increased house prices mean that older generations have built up significant property wealth, but are unable to use this capital for daily living. This could explain the increase in the popularity into equity release. Equity release is a type of mortgage which allows homeowners to turn the value of their property into cash.
Equity release refers to a range of products letting you access the equity tied up in your home. There are two types of equity release:
- A Lifetime Mortgage and
- A Home Reversion.
The funds are secured by way of a loan (mortgage) which lets you take the cash as a lump sum or in instalments. Individual lenders have their own criteria, which will depend on your age and value of your property.
Although equity release may seem the answer to often difficult financial situations, it should not be undertaken without serious thought and consideration. The motivation for equity release comes in many forms, such as helping family members securing a house by providing a deposit, building improvements, pay off debts or supplement pension incomes, which all could create a better standard of living.
In considering equity release you will have the right to remain in your home for the rest of your life or until you need to move into long term care. There is no risk of negative equity, as if after death your property is sold and the property does not cover the amount of the loan, your estate will not be requested to pay more money. You should consider carefully the implications for your Estate, such as a reduced inheritance for your family.
It is always good to consider other options which might be better suited to your circumstances before committing to a lifetime mortgage. For example could you draw on other savings? Downsize? Ask family members to assist financially to ensure you do not have debts in later life? There are organisations who can help you with the decision making process.
Equity release providers require you to take legal advice. Our focus will always be to ensure you as the client clearly understand the implications and impacts an equity release would have on you and your family.
Margrielle Blake is an associate at award-winning regional law firm VWV. Margrielle can be contacted on 0117 314 5380 or at firstname.lastname@example.org.