Is equity release a good thing? Equity release can be a good idea for older people who would like to gain some extra cash in retirement. Equity release can help you make home improvements, pay for the costs of care, help a loved one who is struggling financially, or pay off other debt.
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.
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.
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.
Is equity release safe? Equity release products are safe as they're regulated by the Financial Conduct Authority (FCA) and governed by the Equity Release Council (ERC). With lifetime mortgages, you always own your home and any increase in its value is yours.
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.”
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.
The lowest Equity Release interest rate is currently 2.90% (AER) fixed for life. The highest interest rate in the market is 6.80% (AER). In the Spring 2021 Market Report, the Equity Release Council stated that average interest rates for Equity Release were 3.95%.
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.
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 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.
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.
Can you repay equity release early? If you want to – yes you can, absolutely. However, it's important to reiterate how an equity release lifetime mortgage is designed to remain in place for the remainder of your life or whilst your health allows you to remain living in your main residence.
Equity release can be a good idea for older people who would like to gain some extra cash in retirement. Equity release can help you make home improvements, pay for the costs of care, help a loved one who is struggling financially, or pay off other debt. However, the release of equity is not suitable for everyone.
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.
Home reversion plans.
Lifetime mortgages are by far the most popular type of equity release scheme, making up the majority of the market. With all lifetime mortgage products you are not obligated to make any payments and will retain 100% ownership of your home.
You can use the sale proceeds of your property to pay your equity release back in full when you move to a new home. However, you may incur an early repayment charge. Moving house doesn't always mean you need to pay your plan back in full.
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.
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.
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 simple answer is yes, you do. Equity release schemes based around lifetime mortgages require the youngest applicant to be over 55, while those based around home reversion plans require you to be at least 60. This is because equity release is designed essentially to provide extra money in retirement.
The equity release lender will usually expect that any law firm being used for the equity release application, must have at least 3 or 4 actual lawyers/partners in the firm. This requirement means that your regular local solicitor may not be acceptable.
Unfortunately you can't. If you're wanting to unlock some of the funds that are tied up in your home, equity release could be another alternative to remortgaging. Equity release allows homeowners aged 55-95 to access a portion of their property's value.
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.
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.