Many homeowners have a considerable amount of cash tied up in the equity of their homes – that is, the value of the amount of the home they own, less any outstanding mortgage or loan.
Not only is it possible to release that equity – to enjoy its present cash value – but more homeowners than ever before appear to be choosing to do so. This is a conclusion drawn in a story published in the Guardian newspaper on the 25th of January 2016.
During the course of 2015, a record 22,500 equity release agreements were made, representing a return to the nation’s homeowners of a total of some £1.61 billion.
How do I know if equity release is right for me?
Probably the single most informative source is an online equity release calculator. It might be the best step to gaining some idea of what equity there may be in your home that may be released, depending on the value of the property and your age (you need to be 55 or over to qualify for any equity release scheme).
Combine an equity release calculator with a comparison website which shows the various interest rates currently offered by equity release providers and you may get a pretty clear idea of whether to take things further. There is generally no limit on the number of times you may use the same calculator.
There are any number of such online calculators and it might be difficult knowing which one to choose. Some of the things to look out for when choosing one, therefore, might include:
- how much equity you might be able to release, the interest rates governing the various schemes on offer and what the impact is likely to be upon your estate;
- whether the provider is a member of the Equity Release Council – since this guarantees a certain number of safeguards built into any agreement; and
- whether the site providing the calculator also offers a detailed guide on how equity release works and the arrangements that might be made to answer your queries and discuss your concerns directly with any provider.
Types of equity release
Using an equity release calculator is only the first step in what is invariably a complicated process, involving very serious decisions about the home in which you live, the funds it might unlock and the impact any agreement has on the estate you may pass on to your surviving dependents and relatives.
This makes it important that you seek the advice and guidance of a specialist in the provision of equity release agreements and embark on a learning curve that might lead to your understanding of the two principal vehicles for equity release:
- home reversion – this involves the sale of a proportion of your home to the equity release provider, so that you become a co-owner, but may continue to live in the dwelling until your share of the property is sold upon your death or when you move into long-term care; or
- lifetime mortgage – this is probably a more popular arrangement than home reversion and allows you to make a more reliable calculation of the costs involved. A lifetime mortgage is similar to a regular mortgage, but you make no repayments on the advance, which continues to attract interest in the normal way. The mortgage is repaid from the sale proceeds of the property when you die or move into long-term care.
The use of an equity release calculator may be enough to set you off on the road to unlocking some of the wealth tied up in your home.
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