There are two types of equity release; Lifetime Mortgages and Home Reversion plans. Both of these are regulated by the Financial Conduct Authority.
By using an equity release product, a home owner can draw a lump sum or regular smaller sums from the value of their home, while remaining in their home.
Equity release can play a crucial role in retirement funding and the flexibility and safeguards which are built into plans that complies with the Equity Release Council product standards enable thousands of home owners every year to tap safely in to their housing wealth without having to worry about making monthly repayments.
If you are thinking of taking out an equity release plan then you need to find out as much as you can about your options and weigh up the advantages and disadvantages fully before you decide if equity release is right for you.
This type of Mortgage does not require monthly repayments, although some plans can allow you to pay part or all of the interest in monthly instalments.
You retain ownership of your home and the interest on the loan is compounded. Then both the loan and the interest on it are repaid by your estate when you either die or more into long term care.
If the loan is to you and a partner then the repayment is not made until the last remaining person living in the home either dies or moved into long term care. This means that you are both free to live in your home for the rest of your lives.
With this sort of plan the product provider will purchase a proportion, or all, of your property, taking into account your age and health. This provides you with a tax free lump sum (or regular payments) and a lifetime lease, meaning that you are able to remain in your home rent-free for the rest of your life.
The product provider will not be able to interfere whilst you live in your home and there will be no restrictions set on the way you treat your property whilst you live there. It remains as a private home for you to live your life in.
The value of an investment will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The level and bases of taxation and reliefs from taxation can change at any time. The value of any tax reliefs depend on individual circumstances.
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Reed Financial is a trading name of Reed Financial Ltd, an appointed representative of Best Practice IFA Group Limited which is authorised and regulated by the Financial Conduct Authority registration number 230465. The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren’t able to resolve themselves. To contact the Financial Ombudsman Service, please visit www.financial-ombudsman.org.uk.
The Financial Conduct Authority does not regulate tax planning, tax and trust advice, cashflow modelling, estate planning, national savings or buy to let business.
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