What is equity release?
Equity release unlocks the value built up in your home as a tax free lump sum. There’s no need to move out and you’ll still own your home. With equity release you don’t have to make monthly payments, unless you choose to. It’s usually repaid when the last borrower moves into long term care or dies.
Lifetime mortgages are the most popular type of equity release product and are available to homeowners who are 55 or over.
How does Equity Release work?
If you’re 55 or over you could be able to release equity using a lifetime mortgage, which is a loan taken out against your home. You continue to own your home and you can stay living in it for as long as you like. The loan is then repaid from the sale of your property when you die or enter long term care.
When does a Lifetime Mortgage get repaid?
Unlike a traditional mortgage there is no fixed end date. The loan is normally repaid when you die or move into long term care. In the case of joint applicants when the last surviving person dies or goes into long term.
When the loan is due to be repaid the loan can either be repaid from the proceeds of the sale of your home or by any other means. The mortgage company has no involvement in the sale and cannot force your estate to sell your home for less than the full market price. Any proceeds left after the loan and the accrued interest has been repaid will go to your estate in the normal processes of probate.
You can reduce the interest that is accruing by paying voluntary payments.
As the interest that is charged is added to the loan on a monthly basis the loan value will keep increasing. If you wish to reduce the amount of interest accruing you can make voluntary payments of a fixed amount each month or payments as and when you wish. If you do not want to make any payments you are under no obligation to do so and can start and stop payments as and when you want.
You never lose ownership of your home with a Lifetime Mortgage.
With a Lifetime Mortgage you never lose ownership of your property, the property cannot be repossessed and you can never be forced out of your home due to non payment as there are no payments to be made to the loan. When the loan is repaid any money left over goes to your estate and only the amount owing goes to the mortgage company. The other alternative to a Lifetime Mortgage is a Home Reversion plan, whereby you sell all or part of your property for a cash lump sum which is well below the market value of your home. You can stay in the property for the rest of your life, but will never own the property and on death the loan company will take possession of the house.
That’s why you should have a free consultation with us before you make a decision. We will take the time to understand your financial situation first, tell you whether it’s right for you and recommend equity release products that are a good fit for your needs.