You may be able to unlock more cash from your home with equity release than if you were to remortgage. This is because you don't have to make any monthly repayments. By contrast, a mortgage lender will only lend you what you can afford to repay each month from your income.
There are many alternatives to Equity Release, which I always explore with clients. These include: Selling assets, remortgaging, asking for help from family and friends, grants, moving to a cheaper home, state benefits, renting a room, budgeting, changing employment, or simply doing nothing.
The main disadvantage of equity release is that it does not pay you the full market value for your home. You will receive far less money than you would from selling the property on the open market – although of course in that situation you would still have to find somewhere else to live.
In general, the more equity you have, the better position you're in because the amount of money you owe compared to the value of your home will be lower. If your initial fixed term mortgage is coming to an end, it can be a good option to remortgage.
Equity release plans provide you with a cash lump sum or regular income. The "catch" is that the money released will need to be repaid when you pass away or move into long term care. With a Lifetime Mortgage, you will owe the capital borrowed and the loan interest accrued.
A lifetime mortgage is a type of equity release, a loan secured against your home that allows you to release tax-free cash without needing to move out. Lifetime mortgages are available to homeowners aged 55 or over.
In return you'll get a lump sum or regular payments. You'll normally get between 20% and 60% of the market value of your home (or of the part you sell). When considering a home reversion plan, you should check: Whether or not you can release equity in several payments or in one lump sum.
Yes, it is possible to be refused equity release. This is because there are key criteria that need to be met, in order to make your application suitable and appealing to a potential lender.
Can I release equity if I'm under 55? Unfortunately, no. Equity release lifetime mortgages are only available to those aged 55 or over, and you typically have to be older still (aged 60 or even 65) for a home reversion plan.
The maximum percentage equity you can release from your home is usually up to 60% of the property value. Generally the older you are the more equity you can release. Plus, according to the MoneyHelper, some equity release providers offer larger sums to homeowners with certain medical conditions.
Equity release can reduce the inheritance you leave. This could be due to the fact that you have spent the money, and also due to the interest on the amount you borrowed. That means there could be less for your beneficiaries when it's time to sell the property.
With an equity release plan approved by the Equity Release Council, you can make partial, or full repayment whenever you like. Some plans allow you to make payments without charges; however, some plans will require you to pay additional fees.
Finally and most significantly there is the impact of compound interest that makes equity release so costly. ... Interest rates on equity-release plans taken out today tend to be set at a fixed rate of around 6 per cent. However, older policies charge between 7 per cent and 9 per cent.
What are the interest rates for equity release? The average equity release interest rate was approximately 4% on 11 January 2022. The interest on your lifetime mortgage will depend on how long it runs for and what type of plan you choose.
What is a lifetime mortgage for over 60s? Equity release is a form of mortgaging or remortgaging that allows homeowners aged over 55 to release equity from their homes by taking out a tax-free cash lump sum. An equity release mortgage can help you put aside funds for retirement or buy a second home.
The “core” age group for those signing up to equity release tends to be 65 to 75. However, Dean Mirfin at independent specialist firm Key Retirement says: “Equity release customers are getting older – the average age rose to 71 in 2015, from 69 previously.”
Equity release plans are available to homeowners from age 55, and there is no upper age limit. Not all providers lend at all ages, but most plans are available to applicants aged 60 to 85.
The youngest homeowner must be at least 55 to qualify for and get a lifetime mortgage – the most popular type of equity release plan. That said, some lenders require the youngest applicant to be at least 60. The age of the youngest homeowner always forms the basis of the equity release calculation.
Equity release will not affect your credit score and because the amount of tax free cash you can release depends on your age and the value of your property, your current credit score will not affect you eligibility to apply either.
There are certain conditions you must meet before being able to take out equity release. For a lifetime mortgage you (or both of you, if you're borrowing jointly) need to be at least 55 years old. For a home reversion plan you (or both of you, if you're taking out a plan jointly) need to be at least 65 years old.
Depending on the equity release plan you choose, it usually takes between 6 to 8 weeks to release equity in your home, assuming there are no complications along the way.
All equity release plans approved by the Equity Release Council allow you to move whenever you like. If you have a lifetime mortgage, you may transfer it to your new home. ... You may not therefore have enough equity to purchase a new home.
You can get a mortgage at 60 but you might need a shorter mortgage term. You'll also need to show you can afford the mortgage into retirement. It can be harder to get a mortgage when you're 60 or over. This is because your income is likely to drop when you retire.
A home equity loan could be a good idea if you use the funds to make improvements on your home or consolidate debt with a lower interest rate. However, a home equity loan is a bad idea if it will overburden your finances or if it only serves to shift debt around.
How much equity do I need? Ideally, releasing cash by remortgaging is only something you should do if you have a significant amount of equity built up in the property, to the point that increasing your equity will not dramatically change the loan-to-value of the mortgage.