Latest news with #EquityReleaseCouncil
Sky News
16-05-2025
- Business
- Sky News
Steep rise in equity release - here are pros and cons
More British homeowners are opting for equity release, a report has found. The Equity Release Council reported a 32% increase between the first quarter of 2024 and the same period this year. It is the fourth successive quarter of growth recorded by this market. David Forsdyke, head of later life finance at Knight Frank Finance, said: "Older homeowners are borrowing more to cover their cost of living, which has risen sharply in the past five years. "Many are asset-rich but cash-poor - they have plenty of equity in their homes but perhaps their pensions don't stretch to cover their living expenses. "Equity release offers a solution whereby they can draw down small amounts to top up their income. Others simply borrow to gift money to their children or grandchildren." Changes to inheritance tax announced by the government last year are also causing homeowners to change behaviour. Last October, the chancellor said inherited pensions, which are currently not counted for inheritance tax purposes, will be included from April 2027. Farmers will also have significantly more inheritance tax liability. "Among the fastest growing parts of the market is wealthy homeowners with sufficient levels of income but concerns about inheritance tax," Forsdyke said. "They are raising funds through equity release to move funds into more inheritance-tax efficient investments, perhaps through their beneficiaries." What is equity release? Equity release refers to taking money out of your home without having to sell the property. You can take the money you release as a lump sum or in several smaller amounts. There are two ways to do this: Lifetime mortgage: This is the most common type and is a long-term loan secured against the value of your property. You borrow a cash lump sum and then choose to make repayments - there is no requirement to pay it back monthly and you can just let the interest build up. The loan and the built-up interest must be paid back when the borrower dies or when they need to move into long-term care; Home reversion: You sell a part or all of your home to a provider in return for a lump sum or regular payments. You have the right to continue living in the property until you die and the reversion company then gets a share of the proceeds when your home is sold. To be eligible for equity release you must: Be at least 55; Own a home in the UK and it must be your main residence; Have to meet a minimum property value - usually it's £75,000. Last year, Money took an in-depth look at the pros and cons of equity release... Pros Richard Dana, founder and chief executive of the family mortgage specialist Tembo, said the big benefit of equity release was that it allowed you to remain in the home you want to live in for the rest of your life without any risk of it getting repossessed. It also allows you to "get access to cash where there might not be any other options". "If people want to stay in their home but they want to repay an outstanding mortgage or they need some money for their retirement, they want to boost their retirement funds, that is the main benefit," he said. Cons But equity release comes with many pitfalls that need to be taken into consideration. Dana said that while there is "a lot of regulation around it", it is "really expensive - particularly now". "Unless you have to do it in the current environment, it's very expensive and it means the value of your assets that you might leave to your loved ones is going to go down a lot more. So you are going to be paying a lot more interest than you would have been," he said. Dana said people must seek independent advice, speak with family and consider all options. "Speak to not just an equity release broker but a mortgage broker - look at different options available to you. Depending on what you need the money for, you might be able to find alternative solutions, for example you can downsize." Caroline Fletcher-Shaw, equity release legal expert at Wilkin Chapman Solicitors, said that as well as reducing your estate, and therefore any inheritance you want to leave, it could also impact state benefits, as your income may be higher. She said equity release "tends to have a higher interest rate than other products".
Sky News
29-04-2025
- Business
- Sky News
Steep rise in equity release - as Britons respond to inheritance tax change
More British homeowners are opting for equity release, a report has found. The Equity Release Council reported a 32% increase between the first quarter of 2024 and the same period this year. It is the fourth successive quarter of growth recorded by this market. David Forsdyke, head of later life finance at Knight Frank Finance, said: "Older homeowners are borrowing more to cover their cost of living, which has risen sharply in the past five years. "Many are asset-rich but cash-poor - they have plenty of equity in their homes but perhaps their pensions don't stretch to cover their living expenses. "Equity release offers a solution whereby they can draw down small amounts to top up their income. Others simply borrow to gift money to their children or grandchildren." Changes to inheritance tax announced by the government last year are also causing homeowners to change behaviour. Last October, the chancellor said inherited pensions, which are currently not counted for inheritance tax purposes, will be included from April 2027. Farmers will also have significantly more inheritance tax liability. "Among the fastest growing parts of the market is wealthy homeowners with sufficient levels of income but concerns about inheritance tax," Forsdyke said. "They are raising funds through equity release to move funds into more inheritance-tax efficient investments, perhaps through their beneficiaries." What is equity release? Equity release refers to taking money out of your home without having to sell the property. You can take the money you release as a lump sum or in several smaller amounts. There are two ways to do this: Lifetime mortgage: This is the most common type and is a long-term loan secured against the value of your property. You borrow a cash lump sum and then choose to make repayments - there is no requirement to pay it back monthly and you can just let the interest build up. The loan and the built-up interest must be paid back when the borrower dies or when they need to move into long-term care; Home reversion: You sell a part or all of your home to a provider in return for a lump sum or regular payments. You have the right to continue living in the property until you die and the reversion company then gets a share of the proceeds when your home is sold. To be eligible for equity release you must: Be at least 55; Own a home in the UK and it must be your main residence; Have to meet a minimum property value - usually it's £75,000. Last year, Money took an in-depth look at the pros and cons of equity release... Pros Richard Dana, founder and chief executive of the family mortgage specialist Tembo, said the big benefit of equity release was that it allowed you to remain in the home you want to live in for the rest of your life without any risk of it getting repossessed. It also allows you to "get access to cash where there might not be any other options". "If people want to stay in their home but they want to repay an outstanding mortgage or they need some money for their retirement, they want to boost their retirement funds, that is the main benefit," he said. Cons But equity release comes with many pitfalls that need to be taken into consideration. Dana said that while there is "a lot of regulation around it", it is "really expensive - particularly now". "Unless you have to do it in the current environment, it's very expensive and it means the value of your assets that you might leave to your loved ones is going to go down a lot more. So you are going to be paying a lot more interest than you would have been," he said. Dana said people must seek independent advice, speak with family and consider all options. "Speak to not just an equity release broker but a mortgage broker - look at different options available to you. Depending on what you need the money for, you might be able to find alternative solutions, for example you can downsize." Caroline Fletcher-Shaw, equity release legal expert at Wilkin Chapman Solicitors, said that as well as reducing your estate, and therefore any inheritance you want to leave, it could also impact state benefits, as your income may be higher. She said equity release "tends to have a higher interest rate than other products".
Telegraph
28-03-2025
- Business
- Telegraph
Don't fall for these 7 equity release myths
If you have started your retirement planning, you might be considering the role your property wealth can play. With a lifetime mortgage, the most popular equity release product, you could unlock tax-free cash from your home. However, many people still have misconceptions about how it works. There are hundreds of products available on the market and a variety of flexible features to sort through, so your options are varied. This level of choice can also make things complicated and is one of the reasons why many over 55s still believe the equity release myths. In this article, the truth about equity release is explored as 7 myths get debunked. If you still have questions after reading, you can also get in touch with the expert team at Responsible Equity Release, the providers of the Telegraph Media Group Equity Release Service. You can use the calculator on this page to have a free, no-obligation chat with their Information Team. Myth 1: You can end up owing more than your home is worth The truth: No, there are safeguards in place to ensure you never owe more than your home is worth. Provided you take out an equity release product that meets the standards set by the Equity Release Council, your plan will come with what is known as a no-negative-equity guarantee. This ensures you will never owe more than the value of your home when it is sold. In the unlikely event that the market value of your home falls to less than the amount of your lifetime mortgage, the remaining balance will be written off. Typically, once the mortgage has been repaid, any remaining funds will be paid to your estate or be distributed in accordance with your will. Myth 2: You must make monthly payments The Truth: With a lifetime mortgage, whether or not to make payments is entirely up to you. All lifetime mortgage products that meet Equity Release Council standards will guarantee you the right to make optional payments. These could be to clear the interest monthly or make ad hoc payments to reduce the amount owed. There will usually be a limit above which early repayment charges may apply. If you choose not to make any payments, then interest on the amount you've borrowed will roll up over time. This, along with the initial amount borrowed, is only paid back when the last homeowner either passes away or moves into permanent long-term care and the home is sold. Myth 3: You will no longer own your home The Truth: Taking out equity release does not mean you lose ownership of your home. A lifetime mortgage is a type of product that doesn't involve selling your home to the lender. Instead, you are simply borrowing against it, and you remain the owner. The other type of equity release product, a home reversion plan, involves selling part or all of your property to a provider in exchange for a cash lump sum. However, most advisers no longer recommend this product. Myth 4: You can't move home with equity release The Truth: You will have the right to move home with equity release. Another safeguard of the Equity Release Council is guaranteed portability, meaning you can take your lifetime mortgage to a new home as long as it meets the lender's criteria. If the new home is a lower value, then you may have to pay a portion of the lifetime mortgage back, which could come with early repayment charges. Myth 5: You cannot release equity if you have an existing mortgage The Truth: Having a mortgage doesn't mean you cannot release equity from your home. In fact, using property wealth to help pay off an existing mortgage is one of the most popular uses of equity release. Myth 6: There won't be anything left to leave your loved ones The Truth: Lifetime mortgages have become increasingly flexible in recent years, and there are plans available which allow you to protect a portion of your equity for inheritance. Alternatively, if you don't want your loved ones to have to wait until you die before receiving financial support from you, you could use equity release to provide them with an early inheritance. With the average Responsible Equity Release customer unlocking £98,900 from their homes, there could be plenty available to offer support to your loved ones whilst still achieving your own financial goals. Bear in mind, however, that using a portion of your equity now means that the value of your estate will be reduced. Receiving a cash lump sum could also affect your entitlement to means-tested benefits. If you fall into the band where inheritance tax (IHT) is a consideration, equity release could help to minimise your potential liability. Additionally, provided you live for another 7 years after making it, there may be no inheritance tax to pay on gifts to your loved ones. Myth 7: It is an expensive way to borrow The Truth: Releasing equity with a lifetime mortgage doesn't have to be expensive. There are a variety of features available that could help you to control the costs. For example, you could release your equity in stages using a drawdown facility. Or you could control the impact of interest by choosing to make optional payments. With interest rates being fixed for life, you will always know exactly how much it might cost you. Your personal equity release adviser will also provide a personalised illustration, showing exactly how much, you would owe over time should you choose to release equity. You can use this to consider your plans and whether you want to make any payments over time. Do you have more questions about equity release? If you want to continue getting the truth about equity release, The Telegraph Media Group Equity Release Service may be able to help. By simply filling out the calculator on this page, you will be put in touch with the trusted providers of this service, Responsible Equity Release. They can answer all your initial questions and book you in for your free no-obligation appointment with an adviser. Responsible Equity Release recommend plans from across the whole market, coming only from lenders that are members of the Equity Release Council. This means that you will benefit from their customer-focused safeguards. Their advisers will also help you to consider other financial products like retirement interest-only mortgages and traditional mortgage borrowing. Through comparing a range of options, you can find one that works for you. To begin, simply select how you would like to receive your guide and fill out the requested details in the calculator below. If you are interested in speaking with the Information Team, leave a phone number and they will call you back. FS - About our Partner - ER Read more: Guide to buying a second home How long does equity release take? What if I can't pay off my interest-only mortgage? The above article was created for Telegraph Financial Solutions, a member of Telegraph Media Group. For more information on Telegraph Financial Solutions, click here. Equity release is only available to homeowners that own a property within the United Kingdom. The Telegraph Equity Release Service is provided by Responsible Equity Release. Responsible Equity Release is a trading style of Responsible Life Limited. Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register ( under reference 610205. Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,690. Giving a cash gift may incur an inheritance tax liability. The FCA do not regulate inheritance tax (IHT) planning.
