Equity Release Mortgage
For those aged 55 or over, much of your capital may be tied up in your home. Equity release policies allow you to release some of that capital while remaining in your home for as long as you want. This means that you can take out a lump sum for home improvements or to help out your family with their own needs, or secure a monthly income for yourself.
There are many options and implications to consider when taking out an equity release policy. Mortgages For Your are able to explain the complexities and look at your requirements to find you exactly what you need.
There are two types of equity release, the lifetime mortgage and the home reversion scheme.
A lifetime mortgage can be taken out by those aged 55 and over. The lender will advance you a tax-free lump sum, usually of between 20 and 50 percent of the value of your home, which will be secured against your property. This will either be released to you all at once, or some policies offer the option to keep the money in a reserve account and draw on it when needed.
The lender will charge interest on the money you have taken, but you will not be required to make any payments – the interest is added to the amount of the loan. When you die or the property is sold, for example if you move into care, then the lender will redeem all of the money owed to them. You need to be aware that the interest charges will be higher than with a standard mortgage, plus interest is payable on the whole outstanding amount. This means that once interest is added to the sum owed, interest then starts to accrue on the interest as well as the initial lump sum.
Some lenders offer the option for you to make some interest payments each month to keep the amount owed lower or to make some voluntary payments to reduce the lump sum. There is usually a sizeable penalty for early redemption.
With this type of equity release, you still own your own home and your estate will benefit should house prices increase. There is usually the option to move house to another suitable property, subject to the lender’s approval.
Home Reversion Schemes
Home reversion schemes are offered to those aged 65 and over and allow you to sell all or part of your home to a lender, but to continue to live there rent-free and without paying any interest.
The lender will pay below market value for the property, or a share of it, to compensate for the lack of rent. You would still be responsible for all outgoings and maintenance. There is usually the option to receive either a lump sum or regular payments.
Quite often it is possible to release a larger sum by way of a home reversion scheme than it would be via a lifetime mortgage, depending on your age and health. If you only sell part of the property, then you can still leave an inheritance.
If you die or leave the property sooner than expected, you could lose out by not having a long period of rent-free living. Some policies offer protection against this. If you sell all of your home, then your estate would not benefit from any rise in house prices.
The equity release market is complex, with many different options and considerations. It is important to speak to an independent expert to ensure that you fully understand the implications. You should also discuss your intentions with your family, who may be impacted by your decision.
Mortgages For You are experienced in the equity release market and can help you find the right product tailored for your own needs and requirements. We can explain exactly what you can expect and walk you through the whole process, from application to drawing down the money.
If you would like to speak to us today, with no obligation, ring us on 0121 285 3282.