Your home is probably your most financially important asset. Once you’ve paid off that mortgage, however, that property represents a large amount of tied up capital. While you might be happy leaving it there, many people want to try and get some of that capital back out of their bricks and mortar property, and into their bank account. That’s where equity release comes in.

Equity release is all about utilising this potential, and providing you with a pot of money that you can use to spend in whatever way you want. There are two methods that allow you to do this, which involve taking out a lifetime mortgage or by selling all or part of your home.

What is a Lifetime Mortgage?

This is the process that most people choose when they decide on equity release. It involves taking out a new mortgage on your property. The home still belongs to you but you don’t have to pay anything to the lender until you either die or permanently move into a care home. What you do with the money is up to you – use it to provide finances to your children, invest for the future or simply spend it!

If you want to reduce your liability, some providers allow you to repay the mortgage interest although many people tend not to. There’s a minimum age of 55 for taking out a lifetime mortgage and you can only normally lend up to 60% of the value of the property.

Once you die or move into a home, the property is sold. If the final sale value of the home is less than the amount you owe, you will not be eligible to meet the difference as the loans come with what is called a no negative equity guarantee. You can also move to a new property if your lender agrees and the other property is suitable.

What is Home Reversion?

The alternative is to sell all or part of your property to a home reversion provider for either a lump sum or regular instalments. You get to stay in the home until you die as long as you keep it maintained and properly insured. You will normally get a certain percentage of the property (or part of the property) value. This can be anywhere between 20 and 60%, the potential increases the older you are.

The age when you can opt for home reversion is higher than with the lifetime mortgage, usually over 60 or 65. Again, you can decide to move but the provider has to agree with the choice of new home and there is also a no negative guarantee which means you don’t have to worry about devaluation.

Things to Consider

Whichever method you choose, it’s important to consider a few factors.

First – interest rates on lifetime mortgages are usually higher than normal mortgage deals and finding the right provider is important if you want to keep things under control. There is no fixed date by which the mortgage is paid, so the longer you live the more you will have to pay back from the sale of your home because of the interest.

Second – you might not have anything to rely on as financial support as you get older and the amount you get may affect the state benefits that you get. You also need to factor in the amount of money that you want to leave to your family when you finally die.

And finally,  – whether equity release is the right decision for you is going to depend on a number of factors such as your age, the property you have, the money you can release and what you actually want to do with it. It’s always important to get help from a professional financial adviser when considering moves such as this.

If you want to release the capital in your property, however, equity release is one of the most popular methods and one which many homeowners have used. Pick the right provider and you can enjoy a comfortable retirement with more money in the bank. At Chilvester Financial, we pride ourselves on helping our clients find the right routes to financial security, whether that’s by planning for the future or using their existing assets in a more efficient way. If you would like to know more about equity release and how it might work for you, just get in touch with us today.

If you are in the fortunate position to be able to save some money for the future, you may be wondering which is the best form of investment. Will you be better off investing in stocks, putting it in some form for ISA, or just leaving it in a normal bank account for a rainy day?

A lot of the time, it will depend on what your plans are for that money, but one of the more popular options is often opening an Individual Savings Account or ISA. The Government are trying to encourage all of us to save more which means profits you make with these types of investments come tax-free.

What Are ISAs?

ISAs are a special kind of savings account that allow you to accrue interest and many are offered by banks and building societies. There is a limit or allowance for the amount you can invest each year which is not subject to tax. Some ISAs are flexible, which means that you can take out and you can withdraw the money as and when you want to (though some banks have rules that affect this). Other ISA products mean you have to invest your money for a specific period of time, like 3, 5 or 10 years, before you can withdraw it again.

There are currently 4 different types of ISA on the market today:

Cash ISAs

This is the basic saving account type product and is a popular choice because it’s simple to understand. The allowance lets you put £20,000 into your account each year and there are three different choices:

1. With the instant access cash ISA you can pay in and take out when you want, though some products have a limit to the amount you can withdraw at one time.
2. The fixed-rate cash ISA means your money can’t be withdrawn before a certain period. In return, you get a higher fixed rate which makes this suitable for long term investors.
3. Regular savings cash ISAs will give you a fixed interest rate as long as you make regular contributions each month.

Help to Buy ISA

This was introduced by the Government to help first-time buyers to get on the property market. For every £200 you put into the ISA, they add an extra £50 up to a maximum of £3,000. It’s a high-interest account, with the government contribution being applied when you withdraw the money to buy your first house. There are some rules around who can open a Help to Buy ISA, including you never having owned a property in the past. Something to note though – this will be closing to new savers in November this year,

Lifetime ISA

With a Lifetime ISA, you can put £4000 into your account every year, tax-free. It can be cash savings (so you get interest), or stocks and shares investment (so you get growth). These are designed for 2 main uses: to save a deposit for your first home, and to save for retirement later in life. If you’re using it for the first, you can keep it open to use for the second later on! You do have to be between the ages of 18 and 40 if you want to open one of these accounts though, and if you have one you can keep saving into it until the day before your 50^th birthday.

Stocks and Shares ISA

These are designed to produce a higher return than standard cash ISAs. Your money goes into a number of different investments with varying risk such as unit trusts and corporate bonds. You need to prepare for the possibility that your investment could go down as well as up.

Innovative Finance ISA

This allows you to invest in a newly developing area – peer to peer lending. Your money is used to lend to new businesses and individuals. It not only allows you to get interest tax free, it also lets entrepreneurs and start-ups fund their projects.

How to Find the Right ISA

According to Which?, there are over 1600 savings accounts and ISAs on the market and quite a few of these offer interest rates over 1.8%. With so much choice available, you really need to understand which type of ISA you are looking for and whether it suits your needs. The mainstream banks and building societies are not necessarily the best choices or have the best products and there are some big differences in terms of support and advice as well as interest rates.

It’s a good idea to take your time before settling on one provider over another. There are a lot of things to consider before you commit to an ISA, and sometimes you might not even know what some of the long-term implications could be yet. We recommend you do some research (like reading this article) and speak to a financial adviser (like us) before you make that leap. If you would like to know more about ISA’s, have any questions or just want some advice, we are always happy to help. Just get in touch with our team today and book your consultation.