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The way the UK economy and society has developed in recent decades creates a real importance around Equity Release as a tangible solution for hundreds of thousands, possibly more, of individuals and couples looking for ways to enhance their retirement positions.
The Equity Release solution is both viable and sensible in so many cases.
It arises from a combination of:
- People living longer
- Wealth tied up inproperty
- Stress on public services, especially – in this case – the provision and costs ofcare
- Retirement periods lasting for manydecades
- Higher costs of living inretirement
- Generational imbalances
In our guide, Equity Release, we explore all these factors in greater detail, but for now, if you consider your property solely from a financial viewpoint it is an asset. In many cases a substantial asset, often representing a large part of an individual’s or couple’s wealth.
If it is unencumbered and not subject to any loan, most typically a mortgage, then it is a ‘free ‘asset, as in free of any restriction.
As an asset it can play a pivotal role in later life financial planning, supporting retirement income, providing valuable cash lump sums at important times and helping to paying for care fees amongst other possible needs.
As an industry or sector, it is probably fair to say that Financial Services is fairly bad at making things easy for the uninitiated to understand. Or put another way, the sector tends to make simple things confusing!
This definitely rings true when it comes to Equity Release – as the very names and titles applied to things becomes sketchy and confusing.
The reality is that Equity Release is a description of nothing in particular.
An Equity Release scheme, as such, doesn’t really exist. Equity Release is a broad description of two types of method of releasing equity out of a property. The way to think of it is as a blanket term, which is describing the action, for people of retirement age, to stay in their homes whilst releasing funds from the value of their homes. It also encompasses the wider possibility of releasing funds from other property you may own, beyond your main residence.
The two specific types of schemes are Lifetime Mortgages and Home Reversion Plans.
Both of which are examples of “Equity Release”. Again, we will look at these in our: