Equity Release Mortgages
If you have owned your property for a while it is likely that you have built up a considerable amount of equity.
If you are retired or approaching retirement then you may be looking for ways to supplement your income or to generate a cash lump sum.
An equity release lifetime mortgage can provide a tax-free lump sum or ongoing sums of money that you can spend however you wish, whether that’s on home improvements, luxuries or just day-to-day living costs.
An equity release plan allows homeowners over 55 to access some of the cash locked in the value of their home.
The process starts with speaking with your local equity release adviser – either over the phone or face-to-face.
Then, if you are happy to go ahead, they will search the whole market to find the right equity release plan for you. Usually taken as a lifetime mortgage, it means that the money your home has earned you doesn’t have to stay tied up in the bricks and mortar.
Your home remains your own and the money you receive is tax free.
It could fund the home improvements you want to make or the holidays you want to take. It could give you peace of mind by clearing debts, big and small, and let you support family members when they need it most.
Equity release is just one of the solutions available when you borrow into your retirement.
What’s the difference between a remortgage and equity release?
Types of equity release plans
The term equity release refers to a number of different retirement mortgage schemes that allow older homeowners access to their home equity.
Home reversion plan
A home reversion plan allows you to sell part or all of your home to a reversion plan company in exchange for a tax-free cash lump sum, with no monthly repayments to make.
You have the absolute right to stay in your home rent-free for as long as you choose which is why you don’t typically receive full market value for the share of the home you sell.
Lifetime mortgage
This is the most popular type of equity release and available to homeowners aged 55 or over. You can release some of the equity in your property by taking out a lifetime mortgage. There’s no need to move home and no requirements for any monthly payments.
You are charged interest, and this is added to your mortgage balance, increasing the amount owed each year.
RIO mortgage
A Retirement Interest Only (RIO) mortgage is a type of mortgage product specifically designed for pensioners or older borrowers.
Unlike a normal mortgage, a RIO mortgage has no set end date, making it a useful tool for those looking to borrow against their home or remortgage onto an interest-only mortgage during their retirement years.
Our Guide to Equity Release
Whether you need a cash lump sum or would like smaller amounts over time following an initial release, an equity release lifetime mortgage allows you to choose what works for you, putting you in control of your finances.
Equity release is a type of mortgage for pensioners, and a way of accessing the cash in your home without having to move.
Our guide will explain the different types, who is eligible and how it works.
With an equity release plan you could:
Help your family
Access some of your home’s value and provide financial help for your family. School fees, debt repayments, holiday of a lifetime or a deposit for a home, the choice is yours.
Pay off your existing mortgage
You can generate a tax-free lump sum to repay your existing mortgage and any other debts such as loans or credit cards. With a lifetime mortgage there is no requirement to make any monthly payments, leaving you free of the financial burden.
Stay in your home
By utilising a lifetime mortgage to borrow against your home’s equity you remove the need to downsize, helping you to enjoy your home and live in it for as long as you choose.
Boost your finances
Whether you need a cash lump sum or would like smaller amounts over time a lifetime mortgage can help to boost your finances and improve your quality of life.
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How much can I release?
The amount you can release depends on your age, how much your house is worth and your health and lifestyle.
Generally, the older you are, the more you can release. Some providers take your health and lifestyle choices into consideration which could enable you to release more money.
Your property value: The higher the value, the higher the calculation could potentially be. The minimum property value to be eligible for equity release is £70,000.
The age of the youngest applicant: If you’re applying as a couple, the amount of equity you can release will be calculated on the youngest applicant. To qualify, both of you must be aged 55 or over.
If you want to know more about the eligibility criteria, our team are always on hand. Should you wish to book an appointment, they’ll be able to arrange for you to speak to an adviser who will chat you through the options that are available.
During this initial call, they’ll be able to check whether you’re eligible for equity release or not, and if you are, discuss the plans and answer the questions you may have.
FACTS
The facts about unlocking cash from your home
It is a Financial Conduct Authority requirement that you get professional equity release advice before you take out any equity release product.
Receive a tax-free cash lump sum or regular drawdown amounts
You can stay in your home for as long as you choose – for the remainder of your life
You will never owe more than the value of your home with Equity Release Council approved plans
You can spend your tax-free cash in a wide variety of ways
With a lifetime mortgage you still own your own home
Typically no monthly repayments to make
(unless you want to)
You can move house with Equity Release Council approved plans (subject to criteria)
It will reduce the value of your estate and may affect your entitlement to means-tested benefits
Things to consider with equity release
- A lifetime mortgage is a loan secured against your home.
- There are usually no monthly repayments to make as the loan plus roll up interest is repaid when the plan comes to an end.
- It is designed to last the rest of your life, so if you decide to pay it off early, you could have to pay an early repayment charge.
- Equity release will reduce the value of your estate and may affect your entitlement to means tested benefits.
- Unless you decide to go ahead, the service is completely free of charge as the advice fee is only payable on completion of a plan.
What is the Equity Release Council?
The Equity Release Council is a non-profit, consumer-centric trade body for all things relating to equity release and its industry. Originally known as Safe Home Income Plans (SHIP), the Equity Release Council was relaunched in 2012.
If you are considering releasing equity from your property, choosing a provider that is a member of the Equity Release Council will help you feel more confident in the service you can expect.
All advisers and providers for lifetime mortgages and home reversion schemes are regulated by the Financial Conduct Authority (FCA), and there are rules about what providers have to tell you about equity release in their literature.
You will find more useful information in our article: The Role of the Equity Release Council
EQUITY RELEASE GUIDE
If you would like to read more, our equity release guide provides an in-depth look.
FAQ
Frequently Asked Questions
Will I still own my home?
Yes. Lifetime equity release plans are essentially mortgages. So you will own your home and can stay there for as long as you want to.
Can I move with equity release?
Yes, options to move house are available. This will be possible subject to the lender’s criteria at the time.
What about negative equity?
Plans that meet the Equity Release Council standards come with a no negative equity guarantee.
Do I need a solicitor?
A solicitor will be needed for two reasons. First, to handle the mortgage side and registering the charge. Second, to provide you with independent legal advice concerning the equity release arrangement.
Can you pay back a lifetime mortgage?
Yes you can. With most plans you can pay off a chunk of the debt each year. Any more than this is likely to incur expensive early repayment charges.
