Whether or not Equity Release will affect your benefits depends on what you’ll use Equity Release for and what type of benefits you have. This can get a little complicated, so we recommend you speak to one of our Equity Release advisors to make sure you understand the implications based on your specific circumstances. In this guide, we’ll give you an overview of how Equity Release could affect your benefits in certain situations.
How Are Benefits Means-tested?
The Government looks at your capital, income and savings when deciding whether or not you qualify for benefits. The value of your primary residence isn’t included in the calculation but any second homes will be. When it comes to savings, the following will usually be included in the calculation:
- Cash
- Money in bank accounts
- Money in Tax-Free Childcare accounts
- Money in National Savings accounts
- Premium Bonds
- Income Bonds
- Stocks & Shares
Equity Release to Pay off A Mortgage or Debts May Not Affect Your Benefits
When releasing equity to pay off your mortgage or other debts the money should be paid directly to your lender or loan company on completion of your Equity Release. As the money never goes into your bank account it won’t be included in your savings calculation, and therefore this type of Equity Release will not affect your benefits, even those that are means-tested. However, the money you save from no longer having to pay mortgage or debt repayments will count towards your savings unless you spend it on other things. Releasing equity as cash or income has more of a direct influence on your eligibility for certain benefits because the money will go into your bank account, and therefore it will be included in your calculation.
Which Benefits Could Be Affected by Equity Release?
If you release equity as cash or income you may no longer be entitled to any benefit that is means-tested. The two benefits that are means-tested, and therefore at risk of being affected by Equity Release, are:
- Council Tax Reduction
- Universal Credit
Which Benefits Are Not Affected by Equity Release?
Some benefits aren’t means-tested and therefore releasing equity from your home, even as cash or income, won’t affect your eligibility for these. Two examples of this type of benefit are:
- Disability Benefit
- Personal Independence Payment (PIP)
The Bottom Line
If you are on benefits, it’s important you speak to a professional advisor before taking out Equity Release so you can understand the implications before you make a decision. If you are planning to release equity to pay off your mortgage or other debts then this shouldn’t directly affect your benefits, however, releasing equity as cash or income could affect any benefits that are means-tested.
At Michael Usher Equity Release we’ve been helping our local community for 30 years. You probably have lots of questions, and we’re here to help you understand how these products work and whether they’re right for your situation. We never push you, the choice is always yours to make, and we welcome your friends and family to join in the discussion. Book your FREE no-obligation consultation with one of our friendly advisors to learn more – this can be carried out remotely via phone or video call if you’d prefer. We look forward to helping you!
