Among all the vital affairs of life, financial independence is the most essential affair that anybody needs throughout life. There is no problem during the young age when one is capable of ensuring financial stability via good professional earnings. However, suddenly this strength converts into instability when one gets retired from the job. Although she or he starts receiving pension, it is not adequate to fulfill one’s necessities in the today’s era of increasing inflation rates. This is when house equity release comes to rescue.

House equity release, by allowing a retiree as well as a homeowner to draw some cash from the total worth of the property, acts as the reliable means of ensuring financial independence. To aid the senior citizens, several house equity release schemes are today thronging the market with each offering a different loan amount and interest rate. Consequently, to ensure a fair execution of these house equity release schemes, some regulations are into practice in the release equity market. It is obvious that you need to know about them before you enroll for any scheme.

Two major institutions namely, Safe Home Income Plans (SHIP) and Financial Services Authority (FSA) publish guidelines regularly for ensuring proper execution of the plans in the house equity release market. The aim of the regulations is actually two-fold: to drive the house equity release market and to offer safe alternatives to the retirees.

Although a majority of the plans abide by the SHIP’s Code of Practice, the home reversion plans and lifetime mortgage schemes are regulated by FSA. Despite this fact, the old people are ensured of no negative experience irrespective of the chosen plan. This is because a majority of the house equity release lenders are the members of SHIP. This indicates that the retirees will never owe anything above the actual property value.

All the house equity release providers follow the SHIP regulations to design their plan. Due to this, you are bound to obtain clear obligations, costs, and restrictions of the schemes. Further, these companies have to ensure that they take care of the chosen schemes right from initiation to termination.

Talking about FSA, it plays the role of a free regulator that aims at controlling the financial operations. It further ensures that the senior citizens obtain the fairest deals in the house equity release market. However, it insists upon a thorough research for any customer who wants to engage in an equity release deal.

For the senior citizens, a plethora of house equity release advisors are available in the market so that they can obtain relevant advice or recommendations as per their current financial condition. It is obvious that not all will have the same financial condition. Approaching one of them ensures that a senior citizen chooses the right plan for a wealthy living despite of no regular flow of income. However, this is only possible if your property value or its maintenance level is satisfactory as per the assessment done by the lenders.

George Osborne a UK economist contemplated on the method of calculating the cost of living in the UK. The living cost has become astronomical due to rising inflation. He opined that it would have an impact on millions of families in the UK.

The state benefits and pensions for the retired Britons will be increasing more slowly in the years to come. A significant percentage of the pension income goes to pay taxes. Consumer Price Index (CPI) rises more slowly than Rating Percentage Index (RPI). The former does not incorporate housing costs and mortgage rates. A big difference will be noticed in the balance of pension income and the tax amount paid, over the years.

CPI inflation has recently touched 4.4% whereas RPI is indexed at 5.5%. These are supposed to be 2.5% and 3.6% respectively from the next year. It is speculated that the rate of RPI will be two times higher than that of CPI by the year of 2015. As per the calculations made by George Osborne, the retired would miss out on amount of nearly £700 from the total pension income by April 2016.

However, the retirees who have marketable residential property need not be worried about the increasing cost of living in the UK. The house equity release schemes would help them bear the additional amount of living costs.

Worry and anxiety are the bane of physical health and mental peace. Financial worries are the worst. If you are worried about your finances after retirement, go for equity release and lead a happy life in retirement.

A survey reveals that four out of every ten Britons are under the fear of facing worse financial circumstances. About half are neck-deep in worries about their unpaid loans. According to R3 an insolvency trade body, nearly 43% of the Britons who are approaching the retirement age think that their financial condition will deteriorate in the coming six months. On the other hand, about 45% of the people going to retire are disturbed with the thought of the debt that they owe to the lending market. Credit card debt is a concern with the 57% of Britons. 25% are worried about their outstanding mortgage repayments.

Steven Law, President of R3 states that the cost of living has risen in the UK due to a rise in fuel and utility prices and the increased VAT. It has happened during the times of pay cuts, pay freezes and redundancies in some cases. Why the middle-aged professionals are in doubt about their financial strength to support themselves in retirement is very clear. However, the professionals who are homeowners can keep financial worries at an arm’s length as there are house equity release plans for them.

The Britons are feeling the pinch of rising inflation more than the citizens of other countries, according to Chancellor George Osborne. Increasing prices of food and fuel are responsible for the rising level of inflation in the UK. It is a hard hit on the UK citizens. In the closing ceremony of the G20 summit held in Paris, George Osborne remarked that the fall in the pound’s value has raised the inflation levels by 4%. The weakness of poundsterling was inevitable when the British economy was going through a phase of instability driven by high amounts of debt.

Throwing more light on the issue in the G20 summit’s closing ceremony; Osborne said that the value of the British currency fell due to its overpricing in the world and rebalancing to make the economy a level ground for all. Rebalancing of the economy has resulted in pushing up the food and oil prices more for the consumers in Britain than for the consumers in other parts of the world.

In the UK, the price of petrol has risen from 117p to 133p a litre just in a year. The last month itself, the fuel price rise burdened the average two-car families in the UK with an additional £9 to their monthly petrol bills. The soaring price of crude oils is driving up the petrol price across the world as global demand for crude oils is recovering after the recent financial meltdown. George Osborne fears that the ongoing tumult in the Middle East can add up more 5p to the cost of petrol per litre.

The rising food and oil prices have raised a concern for the senior citizens of the UK. However, the retired homeowners and the 55-year old homeowners can have respite from the pinch of the rising inflation levels. House equity release is the respite for them.

What is equity release? In brief, it is a sort of lifetime mortgage to assist homeowners financially in retirement. The retired people and the people who are over 55 can access money locked up in their residential properties via equity release. The equity of a home is calculated excluding the amount of a secured loan from the value of the home. The term ‘equity’ refers to the cash available from the accumulated value of a property.

The cash flow from the equity value supports your basic and additional expenditures in retirement. The cash from the house equity release can be utilized for any purpose and in any way. There is no restriction from the lender on how you can spend the money. For many retirees, equity release is a good means of debt consolidation. People find it difficult to maintain credit cards and pay monthly interest on borrowed loans after they retire from profession.

You can choose between equity release schemes for lump sum and the schemes for monthly income during retirement. The term of the latter is not fixed and it runs for the rest of the retiree’s life. In case of equity release schemes for lump sum, the lenders get their payment from the final sale of the property following the death of the retirees and their spouses. The leftover money is passed onto the beneficiaries of the retirees.

Many retired people are torn between two conflicting thoughts about equity release. Owing to lack of clear idea, they hesitate to move further to convert the equity value of their residential properties into cash money. Answers to the following frequently asked questions on house equity release will give a clear picture - 

What is home equity?

Equity refers to the monetary value of your house. The equity value of a residential property accumulates over the years minus any kind of loan you have borrowed against it. If you have not mortgaged your house as a collateral to secure a loan, you will get the total equity value.

What does equity release refer to? 

Equity release allows a house owner to retrieve money from the accumulated equity value of the house. It provides a lump sum in cash to the house owner in times of financial need after retirement. It is a source of regular income for the retirees. 

How old does one need to be for equity release? 

You can get the benefits of equity release via two plans – lifetime mortgage and home reversion. You and your spouse need to be over 55 years for a lifetime mortgage plan. You must be 65 to be eligible for a home reversion plan. 

How can one use the money from home equity? 

You have absolute freedom to use the money from your home's equity as you wish. There is no restriction to curb your liberty in this case. You can utilize the money to bear your monthly expenditure, to purchase a car or an asset, to repay a loan, to invest in business or afford a lavish lifestyle. 

Does one need to be in good health condition? 

Good health condition is not among the eligibility criteria for an equity release plan. It is not a concern with the equity scheme providers. However, you had better consult with a provider when you move towards availing a plan from him. 

Follow the next blog answering more questions on house equity release...