Find out more about this financial product that could give you the golden years you deserve.
Equity Release continues to soar in popularity across the nation, as more and more over-55 homeowners are turning to their property wealth to boost their later life finances. Already in the first half of 2018, we have seen a 64% annual increase in the amount released, and helped customers unlock an average of £78,580 from their homes.1
However, despite this growth, confusion still surrounds this industry. Recent research has indicated that as little as 11% of homeowners aged 55 or over fully understand how it works.2
At Responsible Equity Release, we believe that Equity Release can provide important financial security and opportunity to some of the UK’s later life homeowners. That’s why we’re keen on spreading as much knowledge about the industry as possible. Below, we’ve busted 5 of the biggest myths that still surround equity release.
Myth 1: You no longer own your own home
Contrary to popular belief, taking out a lifetime mortgage does not affect the ownership of your home. Your home remains your own for life. The mortgage, plus the interest accrued, only gets repaid once the property stops serving as your primary residence – when you move into long term care for example.
Myth 2: The money you release is subject to tax
Despite what as many as 55% of respondents in the above report believed, the money you release from your home is tax-free. It can be spent however you see fit, from providing an early inheritance to your family to travelling the world.
Myth 3: You can end up owing more than the value of your home
This is completely untrue. The ‘No Negative Equity Guarantee’ ensures that your estate will never owe more than the value of your property when it is sold. Once the property ceases to be your primary residence and is sold, the sale proceeds are used to pay off the lifetime mortgage and any interest that has accrued. Once the loan has been repaid, any remaining funds will be paid to you or your estate.
In the unlikely event that the property sells for less than the amount of the loan, the remaining balance will be written off.
Myth 4: You can’t release equity from your home if you have an outstanding mortgage
False. You can still release equity from your home if you have an outstanding mortgage, provided that the tax-free funds you release or other savings you have are used to pay off the outstanding mortgage balance. In fact, clearing an existing mortgage balance is one of the most popular uses of a lifetime mortgage.
Myth 5: You must make monthly repayments with a lifetime mortgage
Despite the name, a lifetime mortgage features no required monthly payments. As with any other borrowing, an interest rate is charged. Any interest you choose not to pay is simply added to the total and paid when you or your heirs eventually sell the property. However, should you wish, some plans allow you to make voluntary, penalty-free payments of up to 10pc per year of the amount you borrowed.
It is important to consider that a lifetime mortgage may reduce the value of your estate, and the tax-free cash you receive may affect your entitlement to means-tested benefits. Your advisor will provide you with a personalised illustration of the features and risks to you.
If you think that your golden years could be given a shine with a tax-free cash boost, then why not use our free online calculator to see how much you could release from your home?
Could equity release help you? Call us now and speak to one of our expert team who will give you all the information you need.
0800 652 2955
2 Mortgage Strategy, ‘Confusion reigns over equity release’, 25/07/18