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 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.
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.
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.
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's the difference between equity release and a lifetime mortgage? Equity release enables homeowners to retain the use of their home while obtaining an income or funds from it. A lifetime mortgage is one of the two main types of equity release products, the other being a home reversion plan.
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.
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.
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.
Getting advice
Under current rules, all firms offering equity release products must offer you advice. You might also want to get impartial advice on your options from an independent financial adviser, or use a free service like StepChange.
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.
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.
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.
With equity release, you don't have to make monthly repayments. That's because a lifetime mortgage, the most popular form of equity release, is a loan secured against your home which, alongside the roll-up interest, is typically paid back when your plan comes to an end.
How much equity can I cash out? Lenders impose limits on the amount that you can borrow—typically 80% to 85% of your available equity. For example, if you have $250,000 in equity, the lender may let you tap 80% of that, or $200,000.
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.
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.
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.
Is Equity Release Safe? Equity release is safe as it's regulated by the Financial Conduct Authority (FCA) and overseen by the Equity Release Council (ERC). Their rules and safeguards ensure you always own your home and have flexibility to move.
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.
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 need to have 100% ownership before any lender will consider you or your property for an equity release mortgage even if it is shared ownership. However, if you need to borrow money for home improvements it might be possible to arrange a residential mortgage.