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.
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.
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.
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.
Downsizing is a debt free way of getting your hands on your hard earned cash but it does mean moving away from what is possibly the family home. Equity release on the other hand means you can stay where you are but it will impact any inheritance you plan to leave to family.
If you have taken out an equity release plan, you might worry that selling your home is not an option. Fortunately, you can still relocate or downsize.
Some 45 per cent of equity-release products now offer downsizing protection, which can typically be used after the first five years of the loan. “The downsizing protection features allow customers to downsize at a time that suits them, rather than being forced to by financial needs,” Mr Wilkie adds.
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 “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.”
The main disadvantage of equity release is that it does not pay you the full market value for your home. ... Another downside of equity release is that it will reduce the amount of inheritance your beneficiaries could otherwise receive. The specific risks vary with the type of scheme you choose.
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.
However, equity release is offered only up to a far lower loan-to-value than a traditional mortgage. This is because interest is not paid off on the loan and instead rolls up, meaning the amount to be repaid increases over time. ... This equity release calculator shows how much people can typically borrow.
Remortgaging is when you take out a new mortgage on the same property. You can negotiate a new deal with your current provider or start again with a different provider. It means that you'll stay in your existing home and use the equity you have in the property as security for the mortgage.
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.
With equity release you can borrow around 20% to 60% of the value of your home with a lifetime mortgage, or as much as 80% to 100% of the property's value if it is a home reversion scheme. Equity release is commonly used to release money that is tied up in your home and the minimum age requirement is 55 years old.
The key benefit of a Lifetime Loan is that it gives you access to the value of your home without having to move out of it. No regular repayments are required, and the loan only becomes repayable if you sell your home, or after you pass away or cease to permanently reside in your home.
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.
What's the Age Limit for Equity Release? Yes, there is an age limit for equity release: 55 for a Lifetime Mortgage. You can't release equity from your home if you're under 55.
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. Instead, you can port your existing plan to a new property.
We are frequently asked by people considering equity release whether it is possible to sell their house or move in the future if they take out an equity release product such as a lifetime mortgage. The answer to this question is yes, you can sell your home with equity release, subject to meeting some criteria.
Your private and state pension is unaffected by equity release. However, the guarantee credit part of pension credit, which tops up the statement pension to increase pensioners' weekly income, can be affected.
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.
Early repayment charges
As the name suggests, your lifetime mortgage is not designed to be repaid in full before you (and your partner if you have a joint mortgage) die or move permanently into long-term care. However, sometimes your circumstances can change and you might want to repay your loan in full before then.
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.