Getting the Best Equity Release Advice for Your Situation

It's essential to seek advice from a qualified and experienced equity release advisor to ensure you're making an informed decision.

Equity release advisors are regulated by the Financial Conduct Authority (FCA), so look for one who is authorized by the FCA.

A good advisor will assess your individual circumstances and provide tailored advice to suit your needs.

They'll consider factors such as your age, health, and income, as well as the value of your property, to determine the best equity release option for you.

A typical equity release plan can take up to 6 months to set up, so it's crucial to plan ahead.

Equity release is not suitable for everyone, and some people may be better off exploring alternative options, such as downsizing or taking out a mortgage.

Equity release is a way for over-55s to access some of the money in their home, while continuing to live there. This can be attractive for those looking to address a pension shortfall, debt, reduce their inheritance tax bill, or finance later life care.

There are two main types of equity release products: lifetime mortgages and home reversion plans. A lifetime mortgage is the most common way of releasing equity, where you borrow some of your home's value and this loan is repaid when you sell the property, pass away, or go into care.

Lifetime mortgages are a straightforward option, but it's essential to understand the commitment involved. You'll be borrowing money that must be repaid, either from the sale of your home, your estate, or from your pension pot.

Home reversion plans work differently, where you sell part or all of your home to a home reversion provider in return for a cash lump sum or regular income. This means you'll still own part of your home, but the reversion company will get its share of the proceeds when the property is sold.

It's worth noting that equity release is a significant decision and not right for everyone. It's essential to weigh the pros and cons before making a choice.

Here are the two main types of equity release products:

There are several types of equity release plans available, each with its own unique features and benefits. One popular option is a home reversion plan, which allows you to sell a share of your home to an equity release provider while continuing to live there.

You can usually sell between 25% and a 100% share of your property to the provider, but you'll receive less than the market value of that share. This is because the provider takes on the risk of not knowing how long you'll live, and can't sell the property until you pass away or go into care.

Here are some key facts about home reversion plans:

If you sell 50% of your property to the provider, it would get 50% of the sale price. If you sold them 100%, they will get all of the sale proceeds.

Equity release can be a complex decision, but understanding its benefits and drawbacks can help you make an informed choice. You can unlock tax-free cash from your home to help meet your needs in later life.

One of the main benefits of equity release is that you can stay in your home for as long as you wish, while still receiving a lump sum of money. This can be a huge advantage, especially if you're worried about having enough to live on in retirement.

Reduced or no monthly repayments are another benefit of equity release. With a payment-term lifetime mortgage, you can make reduced or no monthly repayments after the oldest applicant turns 66, and overpayments can be made at any time.

However, it's essential to note that the interest can build up quickly on lifetime mortgages and payment-term lifetime mortgages. This means the amount you owe can grow quickly, which may impact your financial situation.

Equity release will also reduce the value of your estate, which may affect your entitlement to means-tested benefits. It's crucial to consider this when making a decision.

Here are some key benefits and drawbacks of equity release to consider:

And here are some of the drawbacks to consider:

Equity release plans can come with various fees and charges, which can add up quickly.

Some plans charge a valuation fee, which can be a few hundred pounds, but many lenders offer free valuations.

Application fees can be up to £700, and you may be able to add this to the amount you borrow.

You'll also need to pay solicitor fees, which are typically between £800 and £1,000, covering the work conducted by your solicitor in dealing with the legal side of setting up the arrangement.

Adviser fees can cost between £700 and £1,900, but some advisers receive commission from lenders instead of charging customers.

It's worth noting that not all providers charge these fees, and some may offer incentives such as free valuations, cashback offers, and application fee waivers.

If you're considering equity release, it's essential to factor in these costs to avoid any surprises down the line.

Here are some of the initial fees you may need to budget for:

Some equity release plans, like lifetime mortgages, may also come with early repayment charges, which can be as high as 25% of the loan amount.

Interest rates on lifetime mortgages can be very high due to the way interest compounds over time. This means that the amount you owe can nearly double in just 15 years, as seen in the example of a £100,000 loan at 4.5% interest.

The average interest rate on a lifetime mortgage was over 4% in early 2022, but by July 2024, it had risen to 6.91%. More expensive deals can even reach rates of 8%.

You can reduce borrowing costs by making voluntary partial repayments each year, which can help mitigate the high interest rates.

Home reversion plans can be a complex and potentially costly way to release equity from your home. You sell a share of your home to the equity release provider while continuing to live there, essentially renting your home from them.

You can usually sell between 25% and a 100% share of your property to the provider, but you'll receive less than the market value of that share due to the risk that the provider takes on.

The home reversion provider gets the same share of whatever your home sells for as repayment when you die or move into long-term care. For example, if you sold 50% of your property to the provider, it would get 50% of the sale price.

Releasing equity through a home reversion plan can dramatically reduce the equity you have left in your property, as shown in the graph comparing lifetime mortgages and home reversion. In this example, releasing £75,000 could mean relinquishing up to 70% of your property's value.

This can be a significant drawback, especially if you're hoping to pass on your property or its full value to your relatives. It's essential to seek professional advice before choosing equity release to understand the potential consequences.

The average interest rate on a lifetime mortgage was just over 4% in early 2022, but this can vary depending on your plan and circumstances.

You can expect to pay higher interest rates compared to a traditional mortgage, with some plans offering rates as high as 8%.

The Equity Release Council stated that the average advertised interest rate was 6.91% in July 2024.

Some lifetime mortgages offer interest rate discounts, particularly those with monthly interest payments, like the interest-payment lifetime mortgage.

Here are some key interest rates to consider:

Keep in mind that interest rates are fixed for the life of the equity release plan, so you'll know exactly how much you'll be paying over time.

The amount borrowed, and the interest compounded, is paid off at the end of the plan, but you can make voluntary partial repayments each year to reduce borrowing costs.