As we approach later life, being able to remain in the comfort and familiar surroundings of our home is the preferred option for most of us.
Depending on your state of health, fulfilling this wish may require support. It could be as simple as helping with tasks, such as cleaning or more significant long-term care. This all comes at a cost and, depending on the amount of care required, could be too great a financial burden.
Equity release is often used as a way for people to stay in their own homes and fund the long-term care that is needed.
What Is Equity Release?
Understanding how releasing equity works is important as, for many people, their home is the greatest asset they own.
- When you release equity from your house, you are receiving money in return for a share of the property based on its value.
- In highly simplified terms, it means generating the cash effectively tied up in your house to use now rather than when it is sold.
- You will be charged interest on the amount of money you receive.
- You can continue to live in your own home, as it will remain your property.
Why Should I Consider Equity Release?
Equity release schemes are an increasingly popular way to help people fund long-term care. To this end, it can be used to pay for:
- A better care home.
- A higher standard of home care provision.
- Making modifications and changes to the home as required.
Planning For Future Care Needs
When considering the future, none of us like to think about our ailing physical and mental health. However, when planning your finances it is important to consider several things. These include:
- Will you have enough money to pay for future long-term care fees?
- Who in your family may most need long-term care and for how long?
- Do you or another family member need to make long-term care provision now?
- How long might you need to pay for a care fees plan?
- Is there a likelihood that home care or a nursing home may be required?
- What activities may you require help with; for example, dressing, using the toilet, feeding or mobility?
- Would your home require additional features, such as a stair lift, an opening and closing bath, or a chair shower?
Can I Release Equity From My House?
Only certain people are eligible to release equity in a house. Generally the criteria are:
- Homeowners aged 55 and over
- Mortgage paid or nearly paid off
- Value of the property exceeds £70,000
- Minimum loan amounts, usually starting at around £10,000
Equity Release Schemes
There are different kinds of equity release schemes. They include:
- Lifetime Mortgage
This is one of the most popular ways of releasing equity. It involves taking out a long-term loan secured against the value of your property. Generally, the older you are the more you can borrow, as you represent a lower risk.
A Lifetime Mortgage is most appropriate for anyone who wishes to retain full ownership of their home.
- Home Reversion Plan
This involves selling part or all of your home and receiving a tax-free lump sum or regular income in return. It is so-called because ownership reverts to the company when you or your partner dies or moves into care.
A Home Reversion Plan is a higher-risk option when compared with a Lifetime Mortgage, and it can carry additional implications for your tax, benefits and inheritance.
All Things Considered
Releasing equity from your home in order to pay for long-term care may not be the best solution for you.
It is important to be fully informed and to understand all the alternatives available before committing to an equity release scheme and to consider any implications regarding state benefits, local authority support and tax obligations.
We would be pleased to discuss all your options with you. To find out more, please contact us.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS.