Equity Release - Should I consider or be concerned?
Research by Canada Life found that one third of over 55s are considering equity release to help in retirement. Despite this, many people fail to consider accessing money from their property. Is it something to consider or be concerned about?
What is it?
It is often taken as a lifetime mortgage, for a fixed rate of interest for life. You do not have to repay the mortgage debt in your lifetime (unless you sell the property), but many providers allow you to, you can repay the interest, and up to 10% of the loan each year should you wish. Early Redemption Charges are normally waived in the event of going into a care home, and/or upon death. Most products offer options should you move home, without penalty.
All products recommended through MLP Wealth are approved by the Equity Release Council, guaranteeing you cannot fall into ‘negative equity’.
Why consider it?
For many, their home is their most valuable asset. You can potentially access a large tax free lump sum from your property. Equity release is also available for buy to let properties.
No proof of income is required and the money can be used:
To provide income in retirement
Clear existing mortgages (especially where mortgages become difficult due to age)
To help buy a new home
For home improvements
To gift money to children/grandchildren; eg. pay for school fees, help buy homes
To help with Inheritance Tax planning (IHT)
For anything you want to spend the money on
What to be aware of?
Many people wish to pass their property onto children, so avoid equity release, not realizing that if it is worth over £1 million, it will be subject to inheritance tax at 40%.
Equity release is a form of debt, and if not repaid the interest will roll up over time. It is important to speak to a qualified independent Adviser to ensure you provided with a suitable solution based on your circumstances.
In conclusion, in the right circumstances, it is a great option, and it should not cause concern.