What is equity release & is it right for you?

Simon Stanney from SunLife gives expert advice on what equity release is and how you can make it work for you.


Simon Stanney from SunLife explains what equity release is and how it works.

What is equity release and what are the benefits?

Equity release offers homeowners aged 55+ a way to unlock some of the money tied up in the value of their home without having to move.

The cash released is tax-free and how you spend the money released after any existing mortgage is paid off is completely up to you. You could clear your debts, fund home improvements, pay for a holiday or a lifetime or simply use the cash to boost your retirement income.

You could also use the cash to pass on a living inheritance to family who need financial support, perhaps to help them get onto the property ladder or fund a child or grandchild through university.

So how does it work?

The most popular way to release equity is with a lifetime mortgage, which is a loan secured on your home. You still own your house and there is no need for monthly repayments because the loan and interest are repaid when your home is sold. This is usually either when you pass away or move into permanent care.

With a lifetime mortgage, you can either take a cash sum or release the cash over time allowing you to access it when you need it – interest is only charged on the amount you’ve taken.

The other type of scheme is home reversion. Only available to homeowners aged 65 and over, this is where you sell part or all of your home to the provider in return for a tax-free lump sum or a regular income. You then live in your home, rent free until you die or move out permanently.

What are the benefits?

The main benefits of a lifetime mortgage equity release plan are that the cash is tax-free, you can stay in your own home, there are no monthly repayments and you can’t owe more than the value of your home.

The downsides are that you reduce the amount of inheritance you pass on. There are fees to pay – though you can cover these using the equity you release – and the interest you owe can grow quickly.

Also, if you are on benefits, these, and any future benefits, may be affected as a result of the change in your income or savings.

Why is it so popular?

According to SunLife’s Finances over 50 report which surveyed 3,000 over 50 year olds, a third of people over 50 don’t think they have enough in their pensions, savings and investments to fund their retirement*. However, many have a considerable amount of equity tied up in their homes.

In fact, according to our research, on average, homeowners aged 55+ have had their homes since 1994, when the average home cost just over £51,000. Now, people over 55 have homes worth almost £291,000 on average [according to SunLife’s Equity Release Report of over 1,000 homeowners over 55 – that means many homeowners over 55 who are looking to supplement their retirement income have properties worth a lot more than they paid for them.

And for those who don’t want to move, equity release offers a solution, which is why it has become so popular over recent years with the amount of new equity release lending doubling from £1.71 billion in 2015 to £3.6 billion in 2018 with no signs of slowing.

Visit https://www.sunlife.co.uk/money/equity-release/ to find out more about equity release, if you are eligible and how much you could release.

*Simon Stanney is Non-Life Business Director [Insurance, Equity Release and Savings], at SunLife.

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