6 March 2013

Liberate some wealth!

It seems to me that there really is no point living in poverty in an expensive house which you own but cannot benefit from. Other people might feel they want to help out the family, make a big purchase, make some home improvements, etc..
What we are talking about here is raising some money by using the value in your house - Equity Release - and it's a growing and very valid area of financial planning in retirement.
Equity Release is a fully regulated area of financial advice, with advice being given by advisers with a specialist qualification, and companies who operate in this market are mostly members of the trade organisation – the Equity Release Council (previously SHIP) – who have their own requirements to be followed by members.

It shouldn’t be the first thing to consider – moving into a smaller house may give a better result, and leave your family with more of a legacy, for example. And you have to bear in mind that raising a sum of money may have an impact on state benefits.

The most common appoach is a Lifetime Mortgage which is a loan secured against your house. You do not have to pay interest each month typically, because it gets rolled up, thereby increasing the loan. It is paid back after you die or move out when the house must be sold. This reduces the value of what you would otherwise pass on to family.

Depending on your age, with a Lifetime Mortgage, for instance, you may be able to borrow between 20% and 50% of the value of your house. If you want an income, you would take it a bit at a time rather than as a lump sum, so that the outstanding loan doesn’t grow so fast. There could be Inheritance Tax benefits as well.

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