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Equity release and state pension

One of the major concerns people often have when considering equity release is how it might impact their state pension.

As equity release becomes an increasingly popular choice for over 55’s looking to unlock the value tied up in their homes, understanding the potential effect on your state pension is crucial if you are thinking about taking this step.
So, in today’s blog post, we would like to explore the relationship between equity release and state pensions, in order to create a clearer picture around this matter.

What is equity release?

Equity release is the term used that allows homeowners aged 55 or above to access the equity built up in their properties.

This type of loan has become increasingly popular over the years and in essence involves taking out a lifetime mortgage.

Borrowers can release anywhere from £10 000 up to over 50% of their property’s value which provides an option that can be particularly attractive for retirees looking to supplement their retirement income or meet unforeseen expenses.

How does equity release impact state pension?

It is no secret that in the current economic climate, many individuals who are approaching retirement may be incredibly concerned that they will not be able to support and sustain themselves solely through their state pension.

For those in such a position, equity release provides an attractive alternative to financial insecurity and the chance to enjoy a richer, more relaxing retirement…

However, many individuals are rightly concerned that equity release may impact their state pension.

The good news is that equity release does not affect your state pension entitlement.

State pension is a separate benefit provided by the government based entirely on your national insurance contributions throughout your working life. Therefore, the amount you receive from your state pension remains unaffected by releasing equity from your home.

What about means-tested benefits?

While your state pension remains intact, it is important to consider the potential impact of equity release on means-tested benefits.

Means-tested benefits, such as pension credit or council tax support do take into consideration your income and capital. Releasing equity from your property could increase your capital and take your savings over a threshold which might affect your eligibility for certain means-tested benefits.

How can a professional adviser help?

Whilst equity release does not directly affect your state pension, it is important to be aware of the potential repercussions involved for means-tested benefits. Seeking professional, trustworthy advice will enable you to fully understand the specific implications equity release entails, based on your own unique circumstances.

Here at North East Equity Release, we have helped countless individuals and couples to make the right choice in line with their specific needs when it comes to equity release, offering impartial advice based on knowledge and experience when it is most needed.

Are you considering equity release but are in need of professional help and advice that you can trust? Get in touch today.

Are you over 55 and a homeowner who is looking to top-up their pension income? Maybe you need some cash so that you can pack your bags and take the sunny holiday you have been dreaming about, or perhaps you are looking to redecorate and make some home improvements.

A lifetime mortgage is becoming an increasingly popular option for individuals within your age demographic who have similar aspirations for their retirement.

Grandad thinking about inheritance as he spends time with his grandchild

So, how exactly does a Lifetime Mortgage work?

A lifetime mortgage is a loan secured against your home. You will retain full ownership of your home and the loan plus the roll up of interest will only need to be repaid when you pass away or enter long-term care.

A major sticking point for many people considering a lifetime mortgage is the thought of not being able to leave any inheritance for your loved ones. However, this isn’t always the case. Many lifetime mortgage products give you the option of choosing an Inheritance Protection Guarantee.

What is an Inheritance Protection Guarantee?

Opting for a lifetime mortgage with an inheritance protection guarantee means that you are able to protect part of the value of your home so that you can leave this behind for your loved ones. Many people choose this option if they would like to gift money to one person and protect the same amount for other friends or relatives, or if they think they would like to apply for additional borrowing at a later stage.

For example, if you have £50,000 available to release from your property, but want to ensure that your grandchildren have an inheritance, you could opt to take £30,000 and leave 40% of your home’s future value protected.

This will be given to your loved ones after you pass away and when the house is sold, irrespective of how much is outstanding on the loan.

The amount protected will still be covered by the No Negative Equity guarantee.

Grandma spending time with granddaughter in house

Are there any drawbacks?

Choosing an inheritance protection guarantee will reduce the amount you’ll be able to borrow, so it will depend on how much cash you want to release from your property. Also, it’s important to consider that if you do choose to release additional funds from your property in the future, this will reduce the amount of inheritance you can guarantee.

If your house decreases in value, the amount of inheritance protected will also decrease.

In some cases, selecting inheritance protection can increase the interest rate on your lifetime mortgage.

How can North East Equity Release help?

Our advisors can tailor your lifetime mortgage to ensure that it is suitable for your current and future wants and needs. We encourage family members and beneficiaries to be present for all meetings to ensure that the future of everyone involved is carefully considered.

We’re here to support you every step of the way. Call us on 0191 695 9493 for FREE advice on lifetime mortgages.

With increasing life expectancy and later life borrowing, many people in the UK are considering more options when it comes to aging gracefully – and comfortably – in their family home.

The thought of downsizing your home, using savings, or relying on local authority and state benefits to move into a care home can be distressing, especially when you are already content and comfortable within your current home.

Did you know that equity release can give you financial peace of mind and is a possible solution for staying in your own home? Equity release has the potential to pay for domiciliary care ensuring your physical and mental wellbeing is cared for when you need it most. If the thought of a care home is upsetting and you are reluctant to hand over the keys to your cherished family home, then equity release could be the financial solution for you.

Read on to discover more about the benefits of equity release for maintaining your independence and accessing long-term care at home.

Grandma and granddaughter watching TV together

Stay in your home

Equity release offers a level of flexibility that you may not have previously considered. The number one benefit of equity release is that it allows you to access money quickly without having to move out of your home.

There is an option to receive a tax-free cash lump sum, with nothing to repay until you pass away or decide to sell the property.

Many schemes offer you the flexibility of withdrawing smaller lump sums as and when required, which can help to keep costs down if you are healthy and your home is in good condition.

Fund long-term domiciliary care

For many aging individuals, home is where your heart is and the idea of giving that up for a cheaper, smaller property or care home accommodation can make you feel like your independence is slipping away. Thankfully, equity release can give you financial freedom and control over the support you receive.

Care at home is becoming an increasingly popular option for many families. With one-to-one personal care that is tailored to you and your specific needs, from once a week to live-in care provision, equity release can help you fund long-term domiciliary care and can help you stay in your home for longer.

Nurse talking to smiling elderly lady in her home

Pay for home modifications

Whether you are an elderly individual living independently and wish to continue living in the comfort of your home, or you’re a family member caring for an aging loved one, safety is a priority. In order to make your home as risk-free as possible and adapted to your mobility needs, home modifications are a prominent concern.

Equity release can provide you with the funds to install flooring modifications to prevent falls, home monitoring systems, assistive seating devices, as well as widened doorways and ramp installation. Whatever health concerns you may have, equity release can help to safeguard your future.

Things to consider

Now that you know the benefits, there are a few things to consider before opting for equity release.

To qualify, you need to be a UK homeowner who is aged 55 years or over, and own a property worth at least £70,000.  There are also minimum loan amounts to consider, generally starting at £10,000.

It is also important to consider how equity release is affected by your age and the value of your property; the older you are and the greater the value of your home, the larger the sum that can be released.

To ensure you are making the right decision about later life borrowing, it’s important to seek the advice of a qualified financial adviser.

North East Equity Release can help you to review current schemes, offering tailored, expert advice to find the perfect deal for you. Get in touch to find out how we can help you age gracefully in the comfort of your home.