Written by Christopher Nye,
Last Modified: 28th February 2019

If you’d like to buy a property abroad but don’t quite have the cash, could you release funds from your UK property? Many homeowners aged over 55 have the option of using the equity built up in their property, tax-free, as cash without selling up or downsizing. 

From a borrower’s point of view, nothing in your everyday life will change for the worse. You continue to own your property, with the deeds in your own name and with the right to remain in your own home for life.

Because you have to keep your UK home, it best suits those looking for a holiday home rather than retirement abroad. However it is a perfect way to use your wealth to create a living legacy. Why leave the kids and grandchildren to enjoy your money when you’re gone, when you could be enjoying a holiday home all together while you’re alive and well? Moreover, you can put the money that you raise alongside other members of the family to buy a home together. Here is how you do it.

Could you keep your UK home and still own a property in the sun?

So what is “equity”?

Equity is the difference between the value of your home and the balance of all the mortgages, secured loans and charges on the property. This can amount to many hundreds of thousands of pounds.

That wealth is just sitting there, not working very hard, waiting to be inherited by your heirs.

Nice though it is to have that wealth, it’s just sitting there not working very hard, waiting to be inherited by your heirs. To use that money, in the past you would have had to sell the property. For people whose children have left home and no longer need the space, that can be an attractive option (although stamp duty tends to put a big whole in any cash saved). But many of us wish to keep the family home.

With equity release you don’t need to move. The money you receive is yours to spend as you please. As the equity is already yours, releasing it is completely tax-free. You can also choose how you would like to receive the money – whether it be a cash lump sum, an account to draw upon as and when required, or a mixture of the two.

Where do I start?

The good news is that modern financial institutions make money simple to understand. Our equity release partner, for example, has a simple online calculator to work out how much is available to you. If you’re still interested, they will send a guide through the post that lays out all your options and implications. You can then chat over the phone, and if both parties feel it is worth pursuing, they will arrange a face-to-face home visit with one of their financial advisers.

Can’t wait to get started? Click here to be find our how much you could release from your home

This is all free of charge, and includes an illustration of exactly how much you can receive and what the costs will be.

If you wish to go ahead the finance company will arrange an independent valuation on the property. Once the valuation has been carried out, an offer will be instructed. You will need to visit a solicitor to discuss the offer before signing.

Is there just one type of equity release?

No, there are several options. The most popular type of equity release is a called a lifetime mortgage. With a lifetime mortgage, you can withdraw a percentage of the property value from your home. You remain the full owner of your property, you’ve just borrowed against it.

With a lifetime mortgage, you can withdraw a percentage of the property value from your home but you remain the full owner, you’ve just borrowed against it

Variable and fixed interest rate lifetime mortgages are available. With the fixed rate you will know exactly what you will be charged. However, sometimes flexible rates offer a lower initial rate.

There are also different types of lifetime mortgage. A “roll-up” lifetime mortgage is where you receive a lump sum and retain 100% ownership of your property and there are no monthly payments to make. A drawdown lifetime mortgage works the same except you can choose to release the money as and when you need it. You can keep funds in a reserve until you choose to use it. Finally, a flexible-lifetime mortgage also means you retain full ownership and take a lump sum, but you can make voluntary payments without incurring any early repayment charges.

How much can I unlock from my property?

Anywhere from £10,000 to nearly the full value of your home. The amount you can release varies dependent on a few factors. Notably, the age of the youngest applicant i.e. you or your partner; your location in the UK, your property value and your medical history. There are plans where you can take as little as £10,000 tax-free and leave the rest in reserve for when you need it. However, all plans come with a guarantee that no matter how much you release you will never owe more than the value of your property.

Equity release means the family can enjoy a living legacy

Equity release means the family can enjoy a living legacy

How do you value my home?

As part of any equity release sale, you will need to have the property valued by a chartered surveyor. This is arranged on your behalf by the lender but is always done by an  independent valuer so there is no conflict of interest. You are free to accept the valuation, appeal against it showing evidence of comparable sales, or switch equity release providers if you are unhappy.

Remember, this is just for illustration purposes as you do not sell any part of your property.

If you’re ready to start looking for property, download our Viewing Trip Checklists will help you stay in control and on track.

What are the basic requirements?

In order to release equity on a home, the following criteria usually needs to be met:

  • To qualify you must be aged 55-95.
  • The home in question must be your permanent main residence and lived in by you for over six months of the year.
  • You must own the home from which you are releasing equity.
  • The home must be worth at least £70,000.

You don’t need to have paid off the mortgage. Indeed if you are over 55 and are still making monthly mortgage payments, releasing equity in your home may be the answer to your financial concerns. Releasing equity will allow you to become repayment mortgage free, meaning you can reduce your monthly outgoings and free up cash for more rewarding things.

What your home is made from is a factor in eligibility. For example, thatched roofs, poured concrete, timber framed homes and indeed anything deemed “unusual” may not be acceptable to some lenders. However, there is usually an equity release provider out there somewhere for your home!

Can I stay in my home?

Yes, you’re guaranteed to keep ownership of your property. You are guaranteed to be able to live there for the lives of you and your partner or for as long as you want to.

You also keep the deeds to your property and maintain 100% home ownership.

There’s no need to sell the family home with a lifetime mortgage

Am I free to move home at a later date?

Yes. You can transfer the plan to another suitable property without penalty. If you decide to downsize in the future, you can repay the plan with the proceeds of the house sale. There may be charges for paying back early but if this was a priority you can normally find a lender who is more flexible with repayments.

Is there a risk of repossession?

With a lifetime mortgage, as long as it is governed by regulatory body the Equity Release Council (formerly known as SHIP), you are not at risk of losing your home. This is because you have the guaranteed right to remain in your property for as long as it is your main residence. This guarantee is written into the offer that both you and the lender will sign.

Will there be anything left to leave as an inheritance?

There are plans available where you can ‘protect your equity’. Here you choose an amount to protect as a percentage, for example 50%. It does reduce the amount you are able to take but it allows you to ringfence a portion and say no matter what, the decision to release equity will not affect that portion of the property. You get the money you require now while your children (or other beneficiaries) receive a sizeable inheritance.

Will I leave debt to my loved ones?

As part of the Equity Release Council’s guarantees, you will never owe more than the value of your home. That means you can’t be in any levels of debt from an equity release plan that cannot be covered by the eventual sale of your property. Your family won’t be forced into a quick sale to repay the equity release debt either. Most equity release providers will allow your estate up to 12 months to sell the property before they even ask any questions. As long as they are taking reasonable steps to sell the property, that is all the lender looks for.

Will I be stuck in the same house?

No, because plans covered by The Equity Release Council are ‘portable’. So you can move them to another suitable property without having to pay any penalty.

When can we start looking at property abroad?

Once you have seen the solicitor and signed the documents, they will conduct their conveyancing work and you will receive a cheque in two weeks upwards.

To find out more, simply fill in the enquiry form on our site for equity release partner with no obligation, and they will be in touch.

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