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What can I spend the proceeds of an Equity Release on?

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Equity release is a way of turning the value tied into your home into cash. It is becoming increasingly popular today and more and more people want to use this option to use some of their home equity to generate additional income during retirement. There are many equity release plans available from several different providers.

Retirement is known as the golden period of life, when one is finally free to do what one wants. But ironically, it is during retirement that cash flow can be a problem and this can limit one’s freedom in so many ways. A pension is generally the main source of income during retirement, which may not always be enough to maintain a comfortable lifestyle. This is why more and more homeowners are considering equity release plans as a way to supplementing their income.

Some people have enough income to support their day to day life, but the problem arises when there is a relatively big one-off expense that needs to be made. This could be anything from home improvement work, to a dream holiday! The released equity can be taken in regular monthly installments or as a lump sum and one off expenses is another reason why people consider releasing equity from their home.

There is absolutely no restriction on what you can use the money for. The proceeds you get from equity release plans are tax free and could be used for a variety of purposes, depending on personal needs. Some common uses of equity release proceeds are home improvement works, buying a new car, investing in a second property or paying for care in your home. Another common use is to gift money to children and family or as supplementary income.

Equity release plans are many and varied. As the concept caught on and became popular, more providers entered the market and equity release schemes became flexible. Increased competition among providers has resulted in a customer-friendly market, with favourable interest rates and better terms of contract. Equity release schemes are now fully regulated by the FSA (Financial Services Authority) which was not always been the case.

Equity release plans can be a good way to generate usable cash from the equity built on your property without selling the house. Obviously, equity release does have some potential risks and disadvantages, and is not for everyone. To understand more about how equity release works and whether it’s right for you, seek the advice of an independent financial expert.

If I Release Equity, who is responsible for the maintenance of the house?

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Equity release schemes can offer an important option to people who are looking to increase their cash flow and at the same time retain their home. If you are considering a home equity release, it is important to understand exactly what it entails and seek professional advice regarding the different policies available.

General information about equity release plans is widely available on the internet. There are many equity release FAQs available online, and this can give you a basic idea of what equity release means, as well as the associated benefits and risks. However, it is necessary to take advice from an independent financial expert about the specifics.

An independent financial adviser who has specialist knowledge about equity release plans and home equity release will have up to date information about different products and providers, as well as about which product is suitable for your particular situation. Another important factor is that an independent advisor has no affiliations to equity release providers and can therefore give far more impartial advice.

An equity release mortgage is a loan taken against the value of the house. Both home reversion loans, as well as lifetime mortgage equity release loans, need to be repaid to the lender once the house is sold. However, the house can only be sold after the owner has died or moved out and into permanent care. In case of joint applicants, this is done after the second applicant has died or moved into care.

When it comes to ownership, there is one key difference between lifetime mortgages and home reversion equity release plans. Home reversion involves selling part of the house and lifetime mortgage involves taking a loan against the house. As such, in home reversion the ownership of the house is transferred to the lender, and in lifetime mortgage, full ownership remains with the borrower. In both cases, the applicant is fully responsible for the maintenance and upkeep of the house.

There are many equity release providers and increased competition in the market has resulted in more competition and better rates for customers. Also, improved and more flexible home equity release products are now available compared to mortgages available until a few years back. You can compare different equity release products on websites such as equity release supermarket.

Can I top-up my Equity Release Mortgage?

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An equity release scheme works out to be the best option for many people who own a valuable property, and need additional cash but do not wish to sell the property. Equity release is fast becoming popular as a way to add to your income during retirement. Interest rates are very competitive today, and the market has some of the most flexible equity release schemes on offer. As such, this may be a good time to explore the option of an equity release loan on your property.

For those who already have an equity release scheme in place, it may still be a good idea to shop around for alternate equity release schemes for two possible reasons. One, it may be possible to get a more competitive mortgage and make significant savings by switching, and two, because you may have exhausted your existing loan and may need an additional loan.

Some lenders do offer top up loans on existing equity release plans. If you have had your existing equity release mortgage in place for more than five years, you may be eligible to apply for a top up. There are independent advisers who can give you advice on equity release top up loans, and alternate schemes.

Some equity release lenders charge early repayment penalties if you repay the loan earlier than a certain period of time. These penalties, if any, vary with each equity release scheme but may be quite high. However, more competitive terms of modern equity release schemes may mean that in spite of an ERC you could still stand to make savings by swapping your existing mortgage for a new one.

If you have had an equity release scheme and are considering shopping around for an alternate scheme, it may be advisable to seek the guidance of an independent financial expert. Independent advice is invaluable in matters such as financial loans, and many financial advisers also handle the entire process of dealing with your existing lender and setting up the new loan.

The internet has some good resources for equity release information and comparison. You can find companies that offer financial advice and information and there are equity release calculator tools available online which may help you get a rough idea of how much additional loan you are eligible to get. Online comparison sites are also useful for equity release comparison and to find the best equity release scheme available now.

Does Equity Release Affect Means Tested Benefits?

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An equity release loan is a loan taken against the equity or value of a property. Thousands of people around the UK are home owners but do not have a sufficient income to support them during their retirement. An equity release loan allows such people to free up some of the equity tied into their property and use it either to boost their regular income or for a one off financial boost.

Equity release schemes have proved to be very popular as an increasing number of people opt for them. However, it is important to understand all the equity release pros and cons before taking a loan against your property. In order to do this, it is important to seek the advice of an independent financial expert who can provide objective advice about whether equity release is the right option for you.

One of the reasons people hesitate to opt for an equity release loan is that it could affect their means tested benefits such as pension credits, council tax benefits, or help with costs of care. People opt for pension equity release to supplement their income during retirement, but if getting one means losing your pension credits, it sort of defeats the entire purpose of getting one!

Releasing equity from your home may affect some means tested benefits, especially council tax benefits and pension credits; however, this is very much a matter of individual circumstances. In any case, only means tested benefits could be affected by an equity release loan, and not other benefits such as disability allowance or carers’ allowance.

It is worth mentioning here that there are two types of equity release loans – the more common type which is taken in regular installments and one which is taken as a lump sum. Loans which are taken for one off goals such as a holiday, home improvement works, etc. do not affect means tested benefits as they do not affect the overall income of the claimant.

In order to check whether taking out an equity release loan will affect your eligibility to claim pension credits or other forms of means tested benefits, it is important to consult an independent financial adviser who has expertise in the field of equity release schemes. This will help you understand whether an equity release loan is the right choice for you.