Equity Release

What is Equity Release?

You’ve been looking to go to Soccer City Stadium in South Africa for some football magic. However, since you don’t have enough cash to pay for the trip to South Africa, you’re almost giving up on your dream. Well, you don’t have to worry. With the equity release scheme, you can easily unlock the value tied up in your home and get tax-free cash to help fund your trip to Soccer city. What’s more, with the equity release calculator you can figure out the amount of equity you’re eligible for.

What’s equity release1, you ask? Well, the mortgage plan is a range of financial products that let you access the equity (cash) locked in your estate if you’re aged 55+ and above. It enables you to get tax-free cash, you continue residing in your home, and you release the capital as a lump sum2 or, in several smaller amounts (drawdowns3) or as a combination of both.

There are two main equity release options, the lifetime mortgage and the home reversion plan.              The lifetime mortgage scheme is the most popular type since it has some of the best options, especially if you don’t have any heirs. It allows you to choose whether to take out your funds in a single lump sum or a series of small amounts within a specified period up to the maximum limit settled on with the plan provider.

If you do have a family, don’t worry because the scheme also caters to your needs. It provides you with the option of keeping some of your residential property’s value as an inheritance. It means you’ve got the advantage of enjoying releasing equity while also making sure your children have something reserved for the future.

The home reversion plan, on the other hand, allows you to access all or part of the value of your estate while retaining your right to reside in it, rent-free. The plan provider will buy all or a part percentage of your estate. Therefore, you’ll know precisely what portion of your estate you have parted with. You’ll also be aware of what’s been ring-fenced4 for the future.

The percentage you maintain in your home will always remain the same regardless of any fluctuations in estate values unless you opt to take any additional cash releases. So, with the home reversion plan, when the lifetime of the loan ends, the lender will put the estate on sale, and the sale proceeds are shared according to the residual proportions of ownership.

Equity release mortgages, unlike traditional mortgages, feature various benefits which include but aren’t limited to:

  • You can relocate or move to a suitable alternative residence in the future since the scheme is transferable. It’ll be subject to your new home meeting the requirements set by your plan provider
  • With the lifetime mortgage plan, you have the right to continue living in and keeping ownership of your residence
  • You’re guaranteed returns. You can get the money depending on the value of your property and the arrangement you have with your lender and not worry about how you will pay it back

After looking into all the impressive benefits of taking the equity release plan and you’re thinking of taking one the schemes out, according to the Equity Release Council5, the trade body that governs these schemes, you have to seek financial advice from an independent financial adviser.  So, don’t worry. You can enjoy that football match and also have enough money to explore the streets of Cape Town and Johannesburg.

Scroll to Top