Equity release schemes enable you to take cash from the equity built up in your property, without the need to sell up and move out. They are targeted at older homeowners who would struggle to take on a regular mortgage and probably have little or no income to make regular repayments. The minimum age is typically 55 on lifetime mortgages.
Lifetime mortgages are the most common type of scheme. The most conventional schemes enable you to take out a loan on your property in return for a lump sum, an income or a combination of the two. You continue to own the property. Usually, you will not make monthly repayments and the debt will be repaid only when you die or go into long-term care. As there are no monthly repayments, the interest "rolls up", and this compounding effect will increase the amount you owe.
The most popular sort of lifetime mortgage is the "drawdown" version, designed for those who do not need a large cash lump sum at the outset. Instead, a pot of money is set aside for you to draw from, as and when you need it. You only pay interest on the cash you release, which could save you a great deal of money. This is ideal if you have future home improvements, holidays or other substantial purchases.
How much can you borrow?
The amount you can raise through equity release depends on a number of factors including the value of your property and how old you. If there are two people jointly taking out the plan, it will be based on the age of the younger.
As the products evolve, there is a product to suit everyone’s needs and circumstances. Once renowned for high early repayment charges, this has been addressed by the lenders and amended to the benefit of the customer. Whether you want a lifetime mortgage or a ‘short term fix’, this is now a viable option.
Products are available so that you can overpay on a monthly basis, choose a proportion of the interest to pay monthly (therefore reducing the speed interest compounds) and with the option to revert to a full roll up as and when your circumstances change. This offers a full range of flexibility and we are sure to find a product to suit you.
We have found an increasing number of clients using a Lifetime mortgage to pay off their existing residential mortgages as they near the end of their mortgage term. This reduces the risk of having to rush to sell your home. This alternative significantly reduces the stress of the whole process and enables the client to make the right decision regarding their future.
Other popular uses are clearing outstanding debt, helping family members with university fees or first time buyer deposits, equity release no longer needs to be the last resort option. Think carefully before securing other debts against your home.
How safe are the plans?
Lifetime mortgages are regulated by UK regulator the Financial Conduct Authority.
Harrison Gray will only offer a product that is with a member of the Equity Release Council. It will have a "no negative equity guarantee" which means customers "will never owe more than the value of their home and no debt will ever be left to the estate".
We believe that the most important thing with these products is that you (and your family, if applicable) receive proper advice to ensure that you fully understand the various options available and exactly how they work. We will take care to explain both the benefits and any potential pitfalls that may apply.
For a free initial consultation
please call us on 01489 854944
Or email [email protected]
To understand the features and risks of an equity release mortgage please ask for a personalised illustration.