Equity release allows you to access money that’s tied up in your home. It gives you a tax-free sum that can be spent on whatever you like. If you’re a homeowner aged 55 or over, it can be a practical way to give yourself financial freedom in your retirement. But is equity release safe?
How does it work?
There are two main types of equity release scheme:
- Lifetime mortgage – a loan on your property that doesn’t require you to make monthly payments.
- Home reversion scheme –you can sell all or just some of your home for cash but can still live in the property rent-free.
These schemes allow you to access money, tax-free, without moving out of your property. The money you take out is repaid when your property is sold, whatever the circumstances.
To be eligible for equity release you must be aged 55 or over and own a home in the UK that’s valued at more than £70,000.
Is equity release safe?
If you’re considering sourcing funds from your property, rest assured that equity release is regulated by the Financial Conduct Authority. Providers must adhere to a strict Code of Conduct and protect your interests.
The safeguards in place for equity release include a ‘no-negative equity guarantee’, which means you will never owe more than the value of your property, and a ‘security of tenure’, which protects your right to live in your property.
If you decide to release equity from your home, it will mean having less property wealth to rely on later in life. This can be an issue if you are deciding to downsize or pay for long-term health care, for instance. You'll also limit the amount of money you’ll have to pass down to loved ones.
As with all major financial decisions, we advise that you speak to an expert before releasing equity from your home. You can call us on (01206) 576 151 or email us to discuss your position further.