What does it mean and is it for me?
If you are a homeowner and aged 55+ you may want to read through this brief overview about releasing money from your home.
Different products fall under the term ‘Equity Release’ which can have negative and positive connotations…
Why do some people believe it’s the best thing they’ve ever done, whereas others believe they’re an extortionate way to ‘borrow’ money?
Your own personal circumstances, beliefs and opinions will largely answer this question, but there are also some other points worth considering.
A lifetime mortgage will allow you to release money from your home and this can be in the form of a lump sum.
You are free to use this money for things like:
- Purchasing a new property (top up required due to new property being more expensive)
- Repaying an existing mortgage – some people have reached older age with a mortgage and their term has come to an end. Therefore, many people have replaced their existing mortgage with a lifetime mortgage
- Home improvements – this can be general décor or adapting your home to suit your longer-term needs in older age
- Early inheritance – some people wish to help younger members of the family sooner rather than later and get to witness family spend the money
- Repay debts: credit cards, loans, store cards etc.
- Purchasing freehold title
- Top up income due to pension income being insufficient
- Holidays/lifestyle expenses
There are many other reasons why you may find yourself requiring funds when all other avenues have been explored.
A lifetime mortgage allows you to release money tied up within your home. Your home will require a survey from the lender’s independent surveyors’ team to confirm the value of the property (survey costs are usually covered by the lender).
There will be a maximum amount you are able to release from your property which is dependent upon your property value, your age and in some circumstances any health conditions you may have.
You are not usually credit scored, which means if you have suffered any credit issues in the past, this doesn’t usually affect whether you can release money from your home.
If you are currently bankrupt or have arrangements with creditors, more information will need to be provided to see whether you are eligible.
Lifetime mortgages offer you flexibility in terms of payments:
You can choose to make no payments at all. This means interest charged will accrue and build up over the term of the mortgage. The term is usually until your death or if a joint application, second death.
You can choose to pay all interest charged, which means the amount you originally released will remain as the amount outstanding to pay.
You can choose to pay up to 10% of the original loan amount (with some lenders), which could mean you are repaying the interest and some capital which will reduce the total amount owed.
You will remain as the legal owner of your home and therefore of course, you are able to live there until you die or if joint application, second death.
As you do not have to make any payments towards your lifetime mortgage throughout the term, affordability isn’t assessed, therefore your income details will not determine how much money can be released.
Most lenders offer a fixed rate for the whole term, which means you can see exactly how much interest is accruing each year, therefore no surprises.
Where to go for advice?
There are many independent lifetime mortgage/equity release experts available on a whole of market basis. This means that advice is provided based on hundreds or products rather than a tied approach with just one lender or limited lenders.
There are many products out there, offering different terms and conditions, therefore receiving independent advice from a whole market range ensures all your needs and circumstances have been reviewed with a wide variety of products considered.
For example, if you are concerned about leaving money to your children upon death, some products allow you to guarantee a percentage of the property value.
Sometimes there are other options available for us to explore together, our approach has always been to do what is right for you and for some people, equity release will be the right thing. Our aim is to provide a service that leads the way within our industry by setting high standards and focusing on your goals. If you would like to discuss your options then please give us a call on 01527 222 694 and ask to speak to one of our advisors.