Equity Release

Equity Release – an overview

The issues surrounding pensions in the UK affects us all, but it is already a very real and daily challenge for millions of retired Britons.

However, many retired people who manage on a small pension and limited savings are also living in a property which, even with the recent house prices falls, is worth a considerable amount. The average house price in England and Wales is now standing at £153,862 (February 2009, see www.landreg.gov.uk/houseprices/).

Equity release plans – also called lifetime mortgages, home reversion or home income plans – are a way of releasing cash, whether to buy that new car, to pay for a holiday or home improvements, or simply to make daily life more comfortable. These schemes essentially allow you to borrow money against the value of your home, with the debt being repaid from the sale proceeds after your death.

How Equity Release Plans Work

While there are a range of different schemes offering lump sums and/or regular income, they all work on the same principle: they lend you a part of your home’s value in return for a share of the proceeds when you die.

In most cases you will need to be at least 60 years old, have no outstanding mortgage (or you will need to use the equity release money to pay down the existing loan), and own a property in reasonable condition.

Equity release plans can be complicated products and are a major step for many people. Your house is almost certainly the most expensive asset you own; it is also your home. Good advice is therefore key.

Arden Financial will look at your overall finances to see if equity release is really the best option for you, help find the right type of scheme.

Equity Release plans – their attractive features

•They can give a lump sum, a regular income or both. The lump sum could be tens of thousands of pounds; the income boost might be worth as much as a hundred pounds a month or even more.

•Money released from the value of your principle residence is free of tax, although if the cash is then invested there may be tax to pay on any income or growth.

•You don’t have to move house or sell your home to unlock equity. With reputable equity release schemes there is a rock-solid guarantee that you will be able to continue to live in and enjoy your home until the day you die – and in many cases still be able to leave something of the property’s value to your family.

•Of course, if you don’t have children or family to leave your property to, then equity release might seem an even more attractive concept.

•They can also be used to pay for care bills without having to sell up at what can be a traumatic enough time.

This is a lifetime mortgage. To understand the features and risks, ask for a personnel illustration.