Equity Release is a way of unlocking cash from your home which can be used for any number of reasons. Provided you are a homeowner and over the age of 55 you can access the equity that is stored in your home. This can be taken as a tax free lump sum, several smaller payments or as a monthly income.
What is an equity release mortgage?
There are two types of equity release:
Lifetime mortgage: A mortgage secured on your property, as with other types of mortgage you retain full ownership of the property. You can choose to ring-fence some of the value of your property as an inheritance for your family. You can also choose to make interest payments or let the interest be added to the loan. The loan amount and any accrued interest are paid back when you die, when you move into long-term care or on the sale of the property. You can also repay the lifetime mortgage at any time, however early repayment charges may apply.
You can borrow up to 58% of the value of your property. How much is released is dependent on your age and the value of your property. The percentage typically increases according to your age when you apply for a lifetime mortgage. Some providers might offer larger sums to those with certain listed medical conditions. See our lifetime mortgage page for additional information.
Home reversion plan: You sell part or all of your home to a home reversion provider in return for a cash lump sum or regular payments. You have the right to continue living in the property until you die, rent-free, but you have to agree to maintain and insure it. It is worth paying attention to what level of home improvements or property maintenance that is expected so you are not caught out by conditions of the agreement.
No negative equity guarantee & Inheritance protection
Both products allow you can ring-fence a percentage of your property for later use, possibly for inheritance. The percentage you retain will always remain the same regardless of the change in property values unless you decide to take further cash releases. No negative equity guarantee, means when your property is sold, and associated fees have been paid. Even if the amount left is not enough to repay the outstanding loan to your provider, neither you nor your estate will be liable to pay any more. Find out more at Equity Release Council
Am I eligible for an equity release mortgage?
Below are some of the conditions or criteria to be considered:
- You need to be at least 55 years old
- You must own the property
- Your property must be in reasonable condition
- Your property must be over a certain value, generally £70,000 is the minimum.
- Any existing mortgage or secured loan on your property will need to be cleared on completion of the Equity Releasee Mortgage
- You can buy a new property using an Equity Release mortgage
If you meet these conditions and are interested in learning more, don’t hesitate to get in touch to learn more about equity release mortgages.
If you take out a Lifetime mortgage, you are taking out a loan secured on your home which does not need to be repaid until you die or move into long-term care.
Unlike other types of Equity Release scheme, your home still belongs to you but you are obliged to repay the loan when certain conditions are met – death, moving into long-term care, sale of the property or if the terms of the mortgage are broken.
The lender can give you a lump sum or you can withdraw funds in stages. Interest is paid on this amount on an on-going basis, or the interest can be ‘rolled up’ and paid together when the loan is repaid.
The loan is normally repaid from the proceeds of your home when it is sold. If there is any surplus from the sale it would be available to your beneficiaries or estate. If the value of the property is lower than the loan and interest which as accrued, it is usual to have a ‘no-negative-equity’ guarantee with the lender, so there would be no debt passed on to your estate.
With all Equity Release schemes it is very important to get advice on whether a lifetime mortgage is the right option for you. We offer flexible appointments, in person over the phone or video call.