Thinking of freeing up equity in your home?

Sales of release capital plans have increased in recent years. In Scotland, figures from the Equity Release council indicate that clients took an average lump sum of £39,834. Average figures for the UK across the UK sit around £72,000 with those for the South East averaging £84,000.

What is Equity Release?

Capital release schemes were first introduced in 1965 and have undergone a number of changes since then. It is a method of retaining your property and at the same time earning a lump sum or steady stream of income from the value of the property.

Who can enjoy a share release plan?

If you are a UK homeowner aged 55 or over, you may be eligible to access money tied up in your home.

What are the different schemes?

There are two types of equity release: lifetime mortgages, where you can borrow money against your home; and home reversal, where you sell a portion of your property.

lifetime mortgages In a lifetime mortgage, you can borrow a proportion of the value of your property, and interest is charged on this amount. You usually pay nothing until you die or sell your home. Interest is compounded over the term of the loan.

start rollback With a home reversion scheme, you would normally sell a portion of your property to the provider for less than market value. You have the right to live in the property for the rest of your life. When you move or die, the property is sold and the provider receives the same portion of the property that they paid for (for example, if you sold 40% to the provider, the provider would receive 40% of the sales price).

Why has it become so popular?

Stock dumping has become popular in recent years for a combination of reasons. One of the key reasons people release income from their properties is to supplement their lifestyle in retirement. Rising home prices have made home ownership a key part of many people’s retirement plans. For some, downsizing is the best thing to do, however, for those who want to stay in their home, equity release offers an alternative way to access the value of your home, while you can still live in it.

Another reason that stock dumping has become popular is due to changes in attitude. While ownership was once expected to cascade down through the family, today many younger generations don’t have the same expectations, or would rather their parents use the capital to enjoy their retirement, which is now likely to last two or three decades. .

Why release the equity in your property?

There are many reasons why you can free up equity in your home. Some of the most popular reasons include financing home or garden improvements, financing a vacation, paying off credit card debt or loans.

What do you need to consider?

Freeing up equity in your home is not a simple decision. It is a lifetime commitment and it is important that you fully understand the obligations and consequences before committing to a plan.

Seeking release advice from a trusted financial advisor is an important step in making sure you’re making the right decisions. A financial adviser will be able to assess your needs and circumstances and advise you whether or not you are eligible for the release of principal and whether or not it would be a smart financial move.