What is Equity Release
Equity Release is also known as a Lifetime Mortgage and is a financial option designed for people who are 55 years or older and own their own homes. It allows them to access cash from their properties without needing to move out. You can continue living in your home as long as you wish, even if you use equity release.
There are different types of equity release products available, like Lifetime Mortgages, Equity Release Mortgages, and Home Reversion Plans. With any of these options, you can release a portion of the money tied up in your home, and the best part is that the money receive is tax-free.
If you are interested in learning more about equity release and the various products available, feel free to reach out to us. We will be happy to explain everything and help you understand which option may be the best fit for your needs.
The difference between Equity Release and a Home Reversion Plan
Equity Release (Lifetime Mortgage):
- Borrow money against your property’s value while keeping ownership.
- Repay the loan when you pass away or move into long-term care.
- No monthly repayments are required.
- Ability to pay part or all of the interest each month or allow it to compound up over time.
Home Reversion Plan:
- Sell a portion or all of your property to a provider.
- Receive a lump sum or regular payments and live in the property as a tenant.
- Provider gets their share of the proceeds when you no longer occupy the property.
Both options have pros and cons. Professional financial advice is crucial.
Equity Release, is it right for you?
Thomas & Co are experienced, independent mortgage brokers authorised by the FCA. We provide comprehensive advice on raising a suitable equity release mortgage on your property.
Our process involves understanding your current and future needs to then recommend a suitable lender. We ensure that all information is presented in an easy-to-understand format, allowing you and your family to grasp the available options fully.
Moreover, we may even suggest alternatives if equity release is not the best fit for you.
We recognise that everyone’s circumstances are unique and encourage having a conversation with us to find the right solution for your journey.
As with any financial decision, equity release has its considerations. It can be beneficial for those needing extra funds in later life, but it will reduce your estate’s value and can affect inheritance for your family. Repayment is necessary upon passing away or entering long-term care.
Given these complexities, seeking expert advice is crucial. Thomas and Co can provide personalised mortgage advice tailored to your situation, enabling you to make an informed decision.
What can the money be used for
Money raised through Equity Release is tax-free and can be utilised for various purposes based on individual needs and preferences. Some common ideas for using the released funds include:
- Helping family members financially.
- Repaying debts and settling existing mortgages.
- Purchasing new properties, such as downsizing.
- Making home improvements or renovations to enhance living conditions.
- Enjoying regular holidays or a holiday of a lifetime.
- Purchasing a new car, static caravan, or even a motorhome.
- Covering in-home care needs
- Or to simply use the funds to supplement regular income and improve financial comfort.
- Private medical expenses are another major reason for releasing equity from your home.
Equity release offers prompt access to funds, typically within 6 weeks, allowing you to quickly consult with specialists to then receive medical care quickly. This quick access to funds can be invaluable for those who require immediate medical attention or are not prepared to endure long-term knee, hip pain.
How much can be released
Equity Release is a personalised process that requires discussions and understanding of an individual’s specific needs and circumstances. While a quick idea can be provided by asking a few questions, it’s essential to consider factors like property value and age.
Since taking out an equity release loan is a significant decision, it is crucial to consult a professional. There are various major factors involved that require careful evaluation, and relying solely on a simple calculator may not provide accurate or comprehensive results.
Myths / Common Questions
I will no longer own my home – False.
Equity Release allows you to release a percentage of your equity for you to utilise now, whilst retaining full ownership of your home.
There will be nothing left for my children – False.
FCA along with the Equity Release Council, mandates that there should always be at least 25% equity left in the value of your property. You can even ring fence as much as you like too, allowing you to still leave a legacy to loved ones. This is called Inheritance Protection.
Are interest rates really fixed for life? – YES.
The interest rate is fixed for the life of the loan. Any further drawdowns are also fixed at whatever rate the lender is charging at that particular point.
I’m afraid I will not be eligible due to my age/health – False.
You need to be at least 55 years old with no upper age limit to apply for an Equity Release loan. What’s more, there are no affordability checks either.
I will have to make payments each month – FALSE.
You do not have to make any payments. By not making any payments, the interest will start to compound up. We advise, when possible, to meet the interest payments to help stop the interest from compounding up. Most lenders allow you to start and stop at any point in time too.
What will happen if one of us dies or goes into long-term care? – It is still your home until the remaining owner either dies or goes into long-term care. At this point, your estate has at least 1 year to sell your property at full market value. The loan, along with any accrued interest will then be paid back to the lender.
What if we want to move home? – Provided that the property is suitable for the lender, this should not be a problem. If the property is not, then the lender will generally dismiss any early repayment charges.
Can I use Equity Release to help buy a property? – YES
You certainly can. This will all depend on your ages and the value of the property.
What are the expected charges/fees – There are no fees at all until the loan completes. Our fee is £995 and the solicitors whom we recommend could be around £850. The solicitor’s fee will be more if there are any complexities or the loan is to purchase a property.
Conclusion – Equity Release can be a valuable tool for people looking to enhance their golden years. Cash can be released for almost anything, from Motorhomes/Caravans, home improvements to help with new mobility issues or even opting to jump NHS queues for private surgery for new knees/hips.