Is equity release right for me?

What is equity release and how does it work?

Equity release is a way for homeowners to unlock some of their home’s value in the form of tax-free cash. 

Whether it’s to repay existing debts, pay off an existing mortgage, or help financially support your loved ones when they need it most, equity release may be a way to help boost your finances in later life. 

A lifetime mortgage is a loan secured against your home. You should always think carefully before securing a loan against your home to repay existing debt.

By taking out a lifetime mortgage, you can access some of the value tied up in your property while retaining full ownership of your home and escaping monthly repayments. 

Usually with a lifetime mortgage, there are no monthly repayments for you to make - unless you choose to - as the loan, plus compound interest, is typically repaid through the sale of the property when the last remaining applicant passes away or moves into long-term care.

You could be eligible for one of our lifetime mortgages if you’re a homeowner aged 55-84 with a property worth at least £99,000 looking to borrow between £10,000 and £1.5 million. The release amount is dependent on your personal circumstances.

Facts about equity release

• It's regulated

Equity release is regulated. Standard Life Finance plans meet Equity Release Council standards

• It can't leave your loved ones in debt

All our plans meet Equity Release Council standards and come with a no negative equity guarantee. That means you can never owe more than your home’s worth or pass on any debt to your family through equity release

• You need advice

Before you go ahead, it’s a regulatory requirement that you receive qualified equity release advice to ensure it’s suitable for your wants, needs and circumstances

 

Benefits and drawbacks of a lifetime mortgage

Your lifetime mortgage can be personalised to your wants and needs. There are many features and benefits available to help ensure the plan you receive is the right one for you.

Benefits

• You can unlock cash from your home, tax-free, to help meet your needs in later life
• You’ll always retain full ownership of your home and can stay in it for as long as you wish with a lifetime mortgage
• You can choose to make reduced or no monthly repayments to suit your circumstances
• You’ll never owe more than your home’s worth with a lifetime mortgage
• You may be able to remortgage your plan in the future to release further funds or secure a better interest rate, although this isn’t guaranteed and may be subject to early repayment charges

Drawbacks

Your equity release adviser will also outline the following important things to think about:

• A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly
• Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
• Equity release may leave you with limited or no property equity remaining
• Equity release will reduce your financial options in the future
• A lifetime mortgage is a long-term financial product and is not designed to be fully repaid until the death or entry into long-term care of the last remaining borrower, otherwise early repayment charges may apply

What you should consider before going ahead

You need to get expert advice before you can go ahead with equity release –we’ll introduce you to equity release specialists Modern Lending Advisers, who offer honest and bespoke advice. Unless you decide to go ahead, Modern Lending Advisers’ service is completely free of charge, as their fixed advice fee of £599 is only payable on completion of a plan. All their equity release advice relates to Standard Life Home Finance’s Horizon lifetime mortgages only –a loan secured against your home.

You’ll be assigned a dedicated adviser who can speak to you in person in your home, over the phone or online -whichever you prefer.

They’ll talk you through equity release and ensure you've considered other financial options -such as downsizing and other forms of borrowing -and give you all the information you need to make a decision.

There’ll never be any pressure for you to go ahead. The adviser’s role is to simply ensure you have all the facts so you can make an informed choice. Whether you choose to take advantage of some of your home’s value through equity release or not is always your decision to make in your own time.

Before you decide, your adviser will explain how equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits.

They’ll also make you aware that your lifetime mortgage is typically repaid through the sale of your property at the end of your plan, which is usually when the last remaining applicant either passes away or moves into long-term residential care.

Alternative options

Before going ahead with a lifetime mortgage, you should consider the alternatives.

• Home reversion

A home reversion plan is another form of equity release where you sell all or part of your home to a reversion company for a cash lump sum. You won’t legally own your home anymore and you’ll get less than market value for the share you sell. But you also won’t face any interest charges and you can live in the property rent-free for as long as you like.

Modern Lending Advisers advice is restricted to Standard Life Home Finance Horizon plans, which are lifetime mortgages, and do not provide advice on Home Reversion products.

• Mortgage

A standard mortgage could be a cheaper alternative to a lifetime mortgage in the long run. However, bear in mind that most mortgages include affordability and credit checks, as well as monthly repayments. Remember a mortgage is secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
 

• Retirement interest-only mortgages (RIOs)

A retirement interest-only mortgage is a conventional mortgage available to over 55s where your monthly repayments cover the interest of the loan. The capital is then repaid through the sale of your property at the end of your plan when you, or the last remaining applicant, either passes away or moves into long-term care.

Your home may be repossessed if you do not keep up repayments on your mortgage.

• Annuities

An annuity is a guaranteed, regular income that you buy, sometimes using your pension savings when you retire.

• Seeking financial help

If a family member or someone you trust has the means to offer you a financial gift or loan, it may be better to ask them first.They’ll usually be more than happy to help.

• Claiming benefits

Ensure you’re claiming any benefits you’re entitled to. Your Modern Lending Advisers equity release adviser will be able to check what you’re eligible for and explain how equity release could affect your entitlement to means-tested benefits. 

• Savings or investments

Before you take out equity release, you should always consider using any savings or investments you have first. However, also think about if you’ll need them later down the line.

• Downsizing

If you’re open to selling your home and moving, downsizing to reduce costs can be a great way to access funds in later life. Although, it’s important to remember that moving home can be a stressful, costly and time-consuming process.