Equity release - release money from your home - by independent financial adviser John Bramwell

Equity Release Schemes

What are equity release schemes?

They are a way of allowing elderly homeowners to release capital or income, or both, from their home. The released funds may then be used to improve their standard of living or pay for repairs or adaptation of their homes. In some cases, the money released can be used to reduce the potential inheritance tax liability on their estate.

What advice will I need?

An equity release scheme should not be entered into lightly as it will affect how much of your home you own and, consequently, the value of your estate when you die. Therefore, it is essential that you consult an independent financial adviser and also obtain legal advice.

What types are there?

There are two types of scheme available, and the best type depends on circumstances such as age, health, property value, etc.

Not all schemes are regulated, but many of the major equity release scheme providers have signed up to the SHIP Code of Practice (Safe Home Income Plans), which covers different types of equity release schemes, not just mortgage based home income plans.

What things should I consider before going
ahead with a scheme?

First of all you should look at alternative ways of raising capital or improving income. For example, are there any grants available for home improvements or are you receiving all the welfare benefits that you are entitled to? Could you move to a lower value property?

If you are in receipt of income related benefits such as Council Tax Benefit and Pension Credit then your benefit may be withdrawn if you receive a lump sum or an income from releasing capital in your home.

How do I select the best scheme?

This should only be done with the help of an independent financial adviser, but some points to consider are:

All schemes should guarantee that you and your partner will be able to continue living in your home for the rest of your lives. Some schemes will also allow you to move house subject to certain conditions, such as the suitability of mortgaging the new property. You must make sure that you fully understand the repercussions of the scheme on the value of your property and the effect of changes in property prices.