Equity release in the current climate, By Marie Dalrymple, Ascot Lloyd Mortgage & Protection Consultant

There are three ways to release equity from your home: downsizing, a Home Reversion Plan, or taking out a Lifetime Mortgage:

1. Downsizing involves moving to a cheaper property, though this potentially means moving away from your home and community.
2. Home Reversion Plan sells part of your home so you can still live there, but you won’t be the full owner.
3. A Lifetime Mortgage means you remain the full owner of your home for life so you do not need to sell or move. There is no need to make monthly payments with a Lifetime Mortgage unless you choose to, and there is the option to guarantee an inheritance and place some funds in a reserve account to withdraw when needed.

There are many reasons why people take out an equity release plan:

• To take out an interest-only mortgage to pay off an expensive repayment mortgage
• For home improvement
• As a gift to children which could help to save on inheritance tax
• To help children get on the property ladder
• To consolidate debt into a single manageable pot
• To supplement your income if your pension isn’t quite enough to live on
• To avoid moving out of a property to raise money
• To pay for care fees or care at home to look after an ill relative

To be eligible for equity release you will need to be aged 55 or over, and have a home in the UK worth at least £70,000.

How much you can borrow depends on the value of your home and the age of the youngest applicant. Maximum Loan to Values (LTV) will vary from one lender to the next and is generally between 20% and 50% of your property’s value. The older you are, the more you can borrow.

If you don’t need all the money you release, you can opt for a ‘drawdown’ option. This means you only release the money you need from your home when you need it. For example, you could release £100,000 but only drawdown £20,000. The benefit is you’d have the £80,000 available to take out without having to go through the application process, and interest is only charged on the amount you release.

Yes, you can take the mortgage with you to your next home although this could be subject to lender criteria.

A common worry with equity release is the fear of repossession, but this will never happen with any plan approved by the Equity Release Council, thanks to built-in safeguards that protect you from ever owing more than you can repay.

The property is usually sold once the last remaining borrower has died. The family will have 12 months to make the sale or pay off the loan themselves and keep the house.