Got any equity? Go on – release some and live a bit!

Equity release schemes go in and out of fashion and have good and bad reputations depending on markets, availability, eligibility and lenders. So, let’s look at some facts:

· You and your partner continue to live in the property for the rest of your lives;
· You draw a tax-free cash lump sum or take an income;
· The money is borrowed from the equity you have in your property with interest rolling up year on year;
· The debt is cleared either when you go into care or you die;
· Your age, health and the value of your property are taken into consideration;
· Members of the Industry body, Safe Home Income Plan, protect people with a “no negative equity guarantee” meaning you can never owe more than your property is worth.

There is a misconception about the amount people borrow and, in most cases, this is not a high proportion of what they actually can, most only want enough to be comfortable. People can borrow a percentage of the property value and initially only take a small drawdown and take more later on – you only pay interest on the amount you have taken.

The current economic climate can, in some ways, be helpful. Although property prices are not as high as a year ago interest rates are now very low – house prices may fall a bit more over the next year or two but, if you take an equity release now, it is taken at the value of the property today. The equity release package is intended to last for much longer than two years and so the property price is very likely to recover before repayment is required. This should then have the effect of the property achieving a higher sale figure and, hopefully, providing inheritance to dependents. There are even equity release schemes that allow you to earmark a percentage of the property value for inheritance purposes.

Vickie Sturman, who works in our Residential Conveyancing Department, is our expert on this subject and would be happy to advise further on the subject.