Funding retirement with equity release

Equity release is becoming an increasingly popular option for those who need some extra cash in their retirement. There are many reasons for wanting more money – perhaps to help the family, to fulfil the lifelong dream of holidays to exotic locations, or just to be able to improve the standard of living.

As a qualified financial advisor, you will be asked to provide advice to someone who is considering equity release and to offer guidance on a complex subject.

An overview of equity release

Equity release products are usually offered to those over the age of 55 who have either paid their mortgage in full, or only have a small amount to pay. The owner of the property will normally be allowed to remain in the property for the rest of their life or move into full time residential care. Not everyone will benefit from equity release, and as a professional with the Certificate in Regulated Equity Release (CeRER), you will be able to consider the individual circumstances and offer advice.

There are two types of equity release. One option allows you to borrow money using the property as security and is called a lifetime mortgage. The other option is to sell a percentage of the property or all of it, in return for a regular income or a lump sum. This option is called a home reversion scheme. It is likely that the lender will have a minimum amount that can be taken this way. Both types of scheme are complex and the advice of a professional will be required by the client.

Benefits of equity release

Equity release can be appealing for many reasons. The property owner will receive a lump sum or a regular monthly income to supplement their pension. For many who have struggled all their working life, equity release allows them to fulfil their dreams during retirement without having to worry about finance. The money generated by equity release is usually paid tax free, unless there are subsequent investments that could lead to tax being payable.

Potential risks of equity release

If a person opts for equity release, they may find that their eligibility for means tested state benefits will be affected by the extra income. This may mean that they have less income than previously. Although a percentage of the property may be tied up in equity release, the property will still be their responsibility and maintenance and repairs will still need to be upheld.

Before making a decision about equity release, consultation with a qualified financial advisor is required.



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