Homeowners - is Equity Release an Option for You?

As homeowners, it's crucial to explore all available options to maximise our investments. One such option is an equity release mortgage, which allows over 55s to tap into the value locked within their home.

Our associated mortgage brokers, Firstxtra Financial Services (or BatesWilcox for Didcot), have recently highlighted the potential benefits of lifetime mortgages, a type of equity release that enables the release of tax-free cash. Let's delve into the details and understand why this option can be advantageous…

A lifetime mortgage provides homeowners aged 55 and over with the opportunity to borrow money against the value of their property while retaining ownership and the right to live in the home. The borrowed amount can be received as a lump sum or a series of payments. The outstanding loan and accumulated interest are repaid upon the death of the homeowner or permanent move into long-term care. It's important to note that making repayments during the lifetime is optional. Additionally, it may be possible to remortgage the plan to release more funds or secure a lower interest rate.

If this is of interest to you, you might be concerned about the impact on your inheritance. However, some equity release plans now offer options to safeguard a portion of your property's value for inheritance purposes. This means you can release equity while still ensuring a legacy for your loved ones.

One significant benefit of lifetime mortgages is the potential for substantial savings. According to research recently published by Key, a specialist in later life finance, their customers unlocked an average of over £114,000 tax-free from their property through equity release. This released capital can be used to support loved ones, settle existing debts, or pay off mortgages. To illustrate the potential net savings, let's consider an example. Repayments on a £50,000 lifetime mortgage after 15 years would result in the following:

• No repayments: Net savings of £0
• Repaying £100 a month: Net savings of £8,371
• Repaying £200 a month: Net savings of £19,828
• Repaying £256 a month: Savings of £26,243

These calculations are based on a 65-year-old couple releasing £50,000 from their £296,000 property, assuming a fixed interest rate of 6.15%.

To make informed decisions and understand the implications of an equity release arrangement, we highly recommend you seek independent financial advice from qualified experts who will evaluate your unique circumstances, explain the available options, and guide you toward the most suitable solution.

Please contact your local Jones Robinson office and we will put you in touch with our expert advisors who can provide specialised guidance.