Equity Release for Pensioners
More and more pensioners are turning to equity release to provide them with more access to money throughout their retirement.
Unfortunately, more pensioners than ever are having to rely on their pensions to see them afloat, especially during the rise in the cost of living.
In fact, equity release for pensioners is a great way of getting hold of the money that has built up in your property over the years.
Whilst the Department for Work and Pensions have released guidance and help on what pensioners can do to tackle the cost of living [1] many pensioners are turning to equity release to help find a way of enjoying their retirement the way they have always dreamed of.
Whilst most people have seen equity release adverts advertised on the TV, not everyone knows and understands exactly what equity release entails.
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Equity release for pensioners – What is equity release?
If you are a pensioner and are considering equity release, then you should speak to a member of the team at Equity Release Warehouse. Equity release is when you withdraw some of the money that has built up in your home over the years.
This includes the increase in value in the property, the initial deposit that you put down on the house and your monthly mortgage repayments, minus the interest that you have been paying on your mortgage over the years.
One of the best things about equity release for pensioners is that you are able to spend the money on whatever you want. If you want to gift it to a family member to help with a house deposit, then that is fine.
If you want to spend it on some home improvements to make your house more comfortable then that is also fine.
Alternatively, you can choose to spend the money on a once-in-a-lifetime holiday. Whatever you choose to do with your equity release money is entirely up to you, as long as you inform your equity release advisor on what you plan on doing with the money.
The other great thing about equity release for pensioners is that you do not have to repay any of the money you borrow from the bank until after you pass away or move into a care home for good.
When you pass away or move into a care home, your next of kin will be responsible for selling your house and will then therefore have to use the money from the sale of the house to pay off the equity release loan.
Unfortunately, this means that although you get access to more money now, your next of kin will receive less inheritance if you opt for an equity release loan.
However, you do have the option of paying off some of the interest that you will be charged on the loan, as this will reduce the amount of compound interest that you are charged, and will therefore increase how much your loved ones might be left after selling the property.
It is important to understand that equity release is really only for individuals aged over 55 years old, who have built up enough money in their home and who have paid off the majority of their mortgage.
For this reason, your property also has to be worth over £70,000 to qualify for an equity release scheme in the UK.
It is also incredibly important that you consult with an equity release advisor before taking out an equity release loan. They will be able to guide you through the process and will be able to recommend the best plans and types of schemes that are available to you.
You will have a number of meetings with your equity release specialist, and they will ask you a number of questions during these meetings to assess whether you are suitable for equity release in the first place.
They will also ask you if you currently receive any financial help or benefits, as these will most likely stop once you take out an equity release loan.
Equity Release Warehouse are specialists in what they do, and their advisors will never put any pressure on you to make a decision.
Please call our 24-Hour Helpline: 0330 058 1579
What are the two types of equity release?
If you are considering taking out an equity release loan, then you should be aware that there are two main types of equity release plans across the UK.
1. Equity release for pensioners – lifetime mortgages
A lifetime mortgage is by far the most popular type of equity release taken out in the UK. Lifetime mortgages are completely tax free and again, you do not repay a single penny of the loan until after you pass away and your house is sold to fund paying off the loan.
You have to be aged over 55 years old to qualify for a lifetime mortgage, and own a property worth at least £70,000. This house also has to be your main residence, meaning that you spend the majority of your time living in the property.
With a lifetime mortgage, you can opt to gain access to the money all at once, through a lump sum plan, or you can opt for smaller and more frequent payments, known as a drawdown plan. Which plan you opt for will depend on how you want to spend your money.
The Equity Release Council also ensures that your loved ones and their inheritance will be protected through something called inheritance protection. This ensures that even if your property decreases in value so much that it no longer covers the loan amount, your loved ones will never be left responsible or liable to repay the loan through their own pockets.
2. Equity release for pensioners home reversion plans
Home reversion plans are the second most popular type of equity release in the UK. When you opt for a home reversion plan, you have to sell a certain percentage of your home in exchange for the money.
For example, you could sell as little as 10% of your property, or as much as 90% of your property in exchange for your equity release money.
However, it is incredibly important to note that when you opt for a home reversion plan, the amount that you sell your home for will only be 30% – 60% of what you would get if you sold your home normally, through the market.
This means that you will get less money than if you were to simply sell your house as normal. However, you do get to remain living in your home.
You have to be aged at least 65 or over and own a home worth more than £70,000 to qualify for this type of equity release.
Please call our 24-Hour Helpline: 0330 058 1579
How much equity could you release?
Equity release for pensioners is a great option, as you get to decide how much money you want to release.
Individuals are usually able to release approximately anything between 20% and 60% of your property in exchange for access to your money. Depending on the total value of your property, this could be a considerable amount of money.
This does heavily depend on a number of factors, including your lender and what their rules are when it comes to equity release. This number also heavily depends on your current state of health, as well as your age.
When you first apply for equity release, someone from the lender will come to perform a valuation on your property to assess how much they think that your property is worth.
How long does equity release take?
Equity release for pensioners is a relatively quick and easy process. How long your equity release application takes depends on a number of factors including how complex your application is, the value of your property and how quickly your solicitors work.
Most equity release applications take around 8 – 12 weeks to process, which is similar to the amount of time it takes to process a normal house purchase.
Please call our 24-Hour Helpline: 0330 058 1579
How much does equity release cost?
There are a number of upfront costs associated with taking out an equity release scheme in the UK. This includes the valuation fee and the solicitor fee. According to Martin Lewis the Money Saving Expert, this could cost you anything between £1,500 and £3,000 [2].
It is also important not to forget about the added interest that you will be charged during your loan duration, which will quickly grow into compound interest.
You do have the option to pay off some of this interest each month or year, to prevent compound interest from occurring.
If you are a pensioner yourself, or a loved one considering equity release for pensioners, then speak to a member of the Equity Release Warehouse team for help and support.
