According to recent research, nine out of ten homeowners over 55 aren’t fully aware of the benefits of Equity Release. This is a scheme which allows homeowners to release a percentage of their home’s value as tax-free cash.
Results from a Sunlife study have shown that many homeowners over 55 have a lack of awareness about Equity Release. The released equity can provide significant financial security for later life. The money can be used for holidays, to pay off loans, make home improvements or make a gift to family members.
More than half of the homeowners questioned did not know that they could move home, even after taking out an Equity Release plan. 85% did not realise they could use equity to pay off an existing mortgage or loan.
However, once informed about the details of Equity Release, eight out of ten homeowners said they would use the plan to access their home’s equity.
With two out of five baby boomers now financially supporting their family, accessing a lump sum would be a major advantage. In fact, a quarter of the surveyed homeowners said they would gift some of the money to their children.
There are two types of Equity Release plans available in the UK:
- Lifetime Mortgage
- Home Reversion Scheme
A Lifetime Mortgage is a loan secured against the value of your home, normally at a fixed interest rate. You can typically borrow up to 60% of your home’s value and you can even ring-fence a percentage for later use. This could be used for family inheritance.
A Home Reversion Scheme is where you sell part or all of your home to a private company. You usually receive 20-60% of your home’s market value.
With the right Equity Release plan, you can enjoy many benefits. You can continue to live in your home, or you can move house once the plan starts. After you have paid off any existing loans or debts, you will be able to spend the tax-free money as you wish. Typically, you don’t even have to pay back the money until the plan ends.