What is equity release?
Equity release is a way of unlocking some of the value of your home and turning it into tax-free cash. If you bought your property some time ago, even if you still have a mortgage, there is likely to be a considerable amount of value in it. Many people are choosing to unlock cash from their homes to pay for home improvements, to gift money to family or to help with personal finance matters.
The most common way to release equity from your home is by setting up a lifetime mortgage, similar to a normal mortgage except that none of it has to be paid off while you’re still living in your home. The mortgage is usually repaid from the sale of your property after your death or if you move permanently into long-term care. In other words, there is a 'no negative equity' guarantee, providing you have met the terms and conditions.
The truth about equity release
- You have to be 55 or over with a UK home worth at least £70,000 to be eligible.
- The cash you release is tax free.
- You can use the money for almost anything you choose.
- You still own your home and you can continue to live there with a lifetime mortgage.
- Some equity release products enable you to receive regular payments.
- There’s no need to make monthly repayments, but with some products you can choose to pay off some or all of the interest as you go.
- You can move house as long as the new property meets the lender’s criteria.
- All lenders must adhere to standards set by the Financial Conduct Authority (FCA).
- The Equity Release Council’s ‘no negative equity’ guarantee means your beneficiaries will never owe more than the property is worth when it’s sold.
- Equity release will reduce the value of your estate and may affect your entitlement to means-tested state benefits.
The myths about equity release
- It’s unsafe and unregulated – This is not the case. Equity release providers are required to meet the standards of the Equity Release Council and the FCA.
- I can’t release equity if I have an outstanding mortgage – Yes you can, depending on the size of your remaining mortgage and how much money you're able to release, but you will need to pay off your existing mortgage balance at the same time. Just be aware that using equity release to repay existing debts or mortgages may cost more in the long-term.
- I could be forced to move out of my home – You have the right to remain in your property for life or until you need to move into long-term care, provided you abide by the terms and conditions of your contract.
- I’ll leave my family in debt – Your beneficiaries will never have to repay more than your home sells for, even if it is less than the amount owed.
- I won’t be able to leave my property as an inheritance – When you die or move into permanent long-term care, your property is normally sold to pay off the equity release provider. Any remaining money from the proceeds of the sale can be passed on to your loved ones. If the loan can be repaid by other means, the house does not need to be sold to cover the debt.
To find out more, request a copy of our free equity release guide today.
Peace of mind
Saga Equity Release and HUB Financial Solutions Limited are members of the Equity Release Council. This industry body ensures that all equity release products are safe and suitable for customers.
As members of the council, both Saga and HUB Financial Solutions Limited follow its strict Statement of Principles that protects customers at every stage of the equity release journey. Find out more about the Equity Release Council.