Making plans for the future can often seem like a daunting task, but organising your finances for later life is more important than ever before. People are living longer and looking to enjoy their retirement years but also want to leave something behind for their loved ones. This is where equity release schemes can provide a solution, as they allow individuals aged 55 and over to unlock money tied to your home for personal use.
Last October, I led a presentation at The Law Society’s Elderly Client Conference on advising equity release schemes. Since then, Giles Wilson has been accepted as a member of the Equity Release Council, which oversees standards to protecting the assets of consumers, guaranteeing peace of mind for our clients.
What is equity release?
As briefly mentioned earlier, equity release gives you access to money tied within your home. There are three ways to release equity from a property:
- Selling and downsizing
- Equity release schemes
- Entering an arrangement with others (family)
In equity release schemes there are two options; you can either enter a Lifetime Mortgage, which is repaid by your estate when you pass away or move into long-term care, or a Home Reversion Plan, where you sell a percentage of your property to a provider. However, each individual case is different and it is essential to seek knowledgeable advice before making arrangements.
Are you ready for equity release?
Last year, presenter Andrew Castle criticised equity schemes after his parents-in-law were required to pay back £116,000 on a £70,000 loan originally taken against their home in 2009. This example highlights the potential pitfalls of such schemes and how it’s crucial to understand the advantages and disadvantages of entering one.
There are numerous questions to consider before taking out an equity release plan:
- How will compound interest affect the original loan?
- How will these arrangements affect your will?
- What effects will it have on your state benefits/tax?
- Are there risks involved in your plans for the money?
- Will you be able to cover the loan if you move into full-time care?
A carefully constructed equity release scheme should not impact on a person’s benefits or tax position. Therefore, it is crucial to cover every aspect of the arrangement in great detail in order to create a watertight arrangement to suit your unique circumstances.
As members of the Equity Release Council, our Private Client team are expertly positioned to provide comprehensive advice on equity release. We act in the best interests of our clients, offering independent, objective guidance on whether this is the ideal approach.
If you would like tailored advice on equity release options, please get in touch on 01702 477106 to arrange a free, 30-minute consultation.