What is an equity release scheme?
An equity release scheme allows you to release some of the value of your home without having to move. You can then use this money to fund a more comfortable retirement.
What should I consider before taking out a scheme?
any implications for your entitlement to benefits – although you will not pay tax on the amount you release if you are in receipt of means tested benefits it could affect your entitlement to them.
If you die shortly after taking out the plan or if there is high growth in the value of the property, these plans are of relatively poor value.
It will reduce the value you have in your home and hence any inheritance you leave.
You will still be responsible for keeping the house in a good state of repair. If you do not maintain the house then the scheme provider may do so and you would have to pay.
If the scheme is taken out while you are single and later you decide to share the home with a partner the scheme may be transferred into joint names. However, there is usually a charge for this. They would also need to meet the age requirements. If the scheme cannot be transferred into joint names then they would have to move out when you die.
Before taking out any scheme advice should be sought from an independent financial adviser specialising in this area. This will ensure the most suitable and competitive scheme is selected.
For more information on:
- Who is eligible to take out a scheme?
- Types of equity release
- Home reversion plan
- Life time mortgages
- Both of these schemes are covered by the lifetime mortgage regulations and are regulated by the FSA.