Equity Release

You want to travel to Italy soon just to explore and enjoy the sumptuous cuisines. Since you’re the type of traveller that goes all in, you want to register for foreign language classes, to learn the Italian language. After checking out some sites, you realize that it’ll cost you a couple of bucks to learn Italian, make plans for a four-month vacation in Italy and also pay someone to take care of your house when you’re away.

After considering a few plans, you stumble upon equity release products, and now you’re curious about what is equity release mortgage and how this financial plan can help you achieve your dreams. Well, here’s a comprehensive guide to help you navigate through the equity release1 world and help you have the best time in Italy.

What You Need to Know About Equity Release Plans

Equity release, in a nutshell, is a mortgage plan that allows homeowners aged 55 and above to unlock the equity tied up in your estate without having to move homes. It’s aimed for those who reside within the remits of the UK and own estates worth more than €70,000. The plan also features two options, the lifetime mortgage schemes and the home reversion plan.

The lifetime mortgage scheme allows you to release capital either through a cash lump sum, drawdowns2 or as a combination of both. It also doesn’t require you to make any monthly repayments unless you choose the interest-only mortgage or voluntary repayment plan that allows you to pay up the interests and only pay back the loan amount at the end of the policy.

The home reversion plan helps you acquire some cash by selling a part or all of your estate. Unlike the lifetime mortgage with this scheme, you don’t pay any interests since the lender offers you cash in one lump sum3. When the plan ends, the lender will put up your home for sale. They’ll then take their share of ownership and offer the remaining proceeds to your beneficiaries.

Unlike other mortgage plans, there are several perks to taking out equity release, and some of these include:

  • You get tax-free capital to spend as you wish – you don’t have to pay income tax or capital gains tax on the money you release from your estate
  • You have the freedom to reside in your estate – you don’t have to downsize or go through the hassles that come with relocating to a new house
  • You’ll never owe more than the initial value of your estate – thanks to the ‘no negative equity guarantee4.’ It also makes sure that no debt can be transferred to your next of kin after the plan provider puts up your estate for sale.
  • It’s regulated by the Financial Conduct Authority and governed by the Equity Release Council. The two bodies set the codes and principles that govern these plans, thus allowing you to take out secure equity release plans while protecting you from unscrupulous plan providers.

Before taking out an equity release mortgage plan, you need to ensure that you seek professional advice. Therefore, as per the ERC’s rules, you have to contact your local financial adviser with an equity release qualification to find the most reliable deal.

Life after retirement can be daunting. However, with a solid financial plan like equity release, you can maintain your lifestyle, pay for foreign language classes, and enjoy that some Italian pizza in the streets of Italy. It’s the ideal stepping stone to a great retirement!                                                                                                                                                                                                                                                                                                           

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