5 key questions about equity release plans

In recent years, equity release plans have become more popular for people looking to release cash from their home as they head into retirement.Whether you are looking for more financial freedom, repaying a debt or a mortgage, or helping family on the property ladder, equity release is an alternative for those who don't wish to move home and downsize.Many people still have unanswered questions about how equity release works and whether it is right for them.In this article we take a look at 5 key questions on how equity release works.How much can you borrow?The amount that you can borrow will depend on the value of your property. How much you can release will also depend on your age, health and that of your partner if you're making a joint application.The average borrower aged in their late sixties can typically release no more than 35% of the total value of their property.Can you release equity from your home before paying off the mortgage?If you still have an outstanding mortgage on your home you will need to pay it off in full. However you can use the cash from the equity you release to do this.In recent years, many people have used the funds from equity release to pay off the borrowed amount of an interest-only mortgage.Do you risk losing your home?No. When taking out an equity release plan, the amount of money you borrowed plus any interest can not go above the value of your home. This is due to a no negative equity guarantee which means you will never owe more than your home is worth.Under a lifetime mortgage equity release plan, you will continue to own your home and have the right to stay in your until death or until you move into long term care.What exactly is a no negative equity guarantee?Most equity release plans are offered with a no negative equity guarantee. This means that you or your beneficiaries will never owe more than what your home is worth when it is sold.When the home is sold, the proceeds from the sale will be used to repay the money owed to the provider of the plan. In the event that the value of the house doesn't cover the amount you owe, the no negative equity guarantee means that the remainder of the loan will be written off.How will taking out equity release affect your family?Before taking out an equity release plan you should be aware that your family could be left with little or nothing to inherit from your property.If you are planning to release equity to offer financial support to family members such as helping them buy a home, it may be worth including them in discussions with your financial advisor.Find out whether equity release is the right plan for youAt Farnworth Rose, we have teamed up with the expert financial advisors at Mortgage 65 to provide specialist advice on whether an equity release plan is right for you.By contacting us you can receive a free consultation on your options, with absolutely no obligation to continue.To arrange your free consultation today, call us on 01282 695 400.Or, simply complete our quick online contact form and we will be in touch with you as soon as possible.