Equity Release - Frequently Asked Questions

What is equity release?

The equity you have in your property is the open market value, minus any mortgage or loan secured against it.

An equity release plan allows you to release tax-free cash from your home to boost your finances in retirement without the need to move.

Who qualifies for equity release?

Clients must fulfil the following criteria:

• Be aged 55 - 95.
• Own their own home.
• This home must be worth a minimum of £50,000.
• Have little or no mortgage - any outstanding mortgage must be repaid with the cash released.
• The property must be freehold or leasehold with a minimum remaining lease period of 75 years.
• The property must be of standard construction.

What equity release plans are available?

There are four types of equity release plans:

• Lifetime mortgages - a loan secured against the property, which accrues interest until the loan plus interest is repaid when the property is sold, usually on entry into long-term care or death. They are available to homeowners 55+, with little or no mortgage outstanding. Clients can typically release 18-50% of the value of their home, depending on age.
• Home reversion plans - part or all of the property is sold in exchange for a tax-free cash lump sum and a guaranteed lifetime lease with no monthly repayments to meet.
• Drawdown plans - a drawdown lifetime mortgage has the same advantages and disadvantages as a regular lifetime mortgage, as well as a few more that are unique to this kind of equity release scheme. The main difference with a drawdown plan is that the full sum of money available to the client isn't released immediately. Instead, they decide on a maximum amount of equity they want to release, and 'drawdown' the cash in stages when they want to.
• Home income plans - with a home income plan, equity is release through a lifetime mortgage or home reversion plan and is automatically invested into an annuity that is built into the plan, to generate an income for life. A cash lump sum may be available in addition to an income, but the amount may be restricted.

What safeguards are in place to protect clients?

We work in conjuntion with Key Retirement Solutions who only recommend SHIP approved plans so they all come with a set of guarantees to ensure clients' safety:

• The right to remain in their home for as long as they choose
• The freedom to move to another property without financial penalty (subject to lenders' criteria)
• That they will receive a cash lump sum or a regular income
• That they will never fall into negative equity no matter what happens to house prices in the future