UK house prices are soaring.

Official figures show they have been increasing at their fastest rate for more than a decade despite the country being gripped by a pandemic.

According to Nationwide’s latest house price index report for June, annual house price growth rose to 13.4% - the highest level since November 2004 - with the average property value now standing at £245,432.

And Future Life Wealth Management is now being approached by homeowners wondering how they can access some of the growing equity in their homes.

Here, we cover the various routes to releasing equity and the main pros and cons to consider before you make a decision.

As always, if you are seriously considering equity release in any way shape or form, it is a complex area and we recommend that you get in touch at the earliest opportunity for professional advice.

Option 1 - Downsizing

The simplest way to free up some of the equity you have built up in your property is to downsize and move to a smaller (priced) home.

There can be many practical reasons to downsize, such as:

- Repaying any existing mortgage debt

- Moving closer to family

- Reducing your running costs and monthly outgoings

- Living in a more accessible or manageable property

Moving home can be stressful and take an emotional toll and there are costs to consider such as legal fees, agent fees, stamp duty and moving expenses.

From a tax perspective, there is generally no capital gains tax to pay on the sale of your main residence. Furthermore, for those concerned with inheritance tax, you may still qualify for the higher residence nil rate band under the ‘downsizing addition’ rules.

Option 2 - Remortgage your home

If downsizing is not a feasible consideration or you wish to remain in your current home, you could look to re-mortgage your existing property.

Whether you have built up equity in your property through repaying down a mortgage or the property value increasing, you may be able to secure a mortgage to release some of that equity.

For those with existing mortgages this could mean remortgaging with another lender at a lower loan to value or consider borrowing more on top of what you already owe. Either way, it is very important that you check the early repayment penalties on your current deal – however, in some instances a remortgage can save you a lot of interest long-term.

A key consideration here is that you are adding to your debt and likely extending the term of your loan. It can also be difficult for those on low incomes or over the age of 50, however, there are some products in the market tailored to these individuals.

Before considering a remortgage it would be beneficial to consider all options such as an unsecured loan or access to other savings and pensions.

Option 3 - Equity release

Equity release is available only to those aged over 55 and is an alternative way of withdrawing tax-free cash from your home without having to sell.

There are two types of equity release: lifetime mortgages and home reversion plans.

Lifetime mortgages are the most popular type of equity release. You borrow against the value of your home, maintain the ownership but owe the lender the amount borrowed plus interest.

This is generally repaid when you die or move into long-term care, although some lifetime mortgages allow you to make monthly repayments to reduce the loan overtime.

A home reversion plan is available to older borrowers, usually those above 65 years old. Where it differs from a lifetime mortgage is that the equity release provider buys some or all of your property – although you can remain in your home, rent-free, for the rest of your life or until you go into care.

Equity release is complex and it is certainly not for everyone. Whilst you get to stay in your property, these types of products can be expensive, affect your entitlement to state benefits and may have tax implications.

All equity release providers must be regulated by the Financial Conduct Authority and you will need to seek independent financial advice.

There’s more than one way to unlock some of the value in your home, and you don’t necessarily have to move house to do it.

To find out more, please get in touch with Future Life Wealth Management at your earliest convenience to get impartial advice on the options available to you.