Equity Release Lifetime Mortgages
Many people today find themselves with a valuable asset – their home – but a limited income. There often isn’t the money to realise a life-long ambition.
The solution may be an Equity Release or Lifetime Mortgage.
There a number of schemes available, mostly designed for retired people wishing to release some of the equity tied up in their property. The schemes are simple, effective and ideal for quite a lot of people.
Anyone who is uncertain should:
Talk to an adviser
Not all mortgage advisers are abe to give advice on equity release or lifetime mortgages and additional qualifications are required before advisers can discuss the schemes.
Creditmarket.co.uk does not provide financial advice just access to qualified, regulated advisers across the UK.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Information About Equity Release Lifetime Mortgages
An equity release mortgage (also known as a lifetime mortgage) is, more or less, a “reverse” mortgage. Instead of paying money to build equity in your home, you receive money for releasing that equity.
How does it Work?
There are three main criteria for an equity release mortgage—borrowers must be a UK citizen, they must own their home and meet age requirements.
Most schemes require that the borrower to be over 55 but some have higher age requirements—each company has their own specific regulations. Additionally, most companies will require the property to be worth a certain amount and that there is no outstanding mortgage. Some companies may allow a small outstanding mortgage as long as the outstanding balance is cleared with funds obtained from the equity release mortgage.
An equity release mortgage works fairly simply. People can borrow between 20 and 50% of their home’s value—the exact amount depends on age. The lower the age, the less there is available to borrow.
Funds can be recieved as either a tax-free lump sum, in monthly instalments, or in smaller lump sums as needed. Instead of paying interest as with a
traditional mortgage, the amount owning on the loan is allowed to accrue.
The loan balance and the interest are paid when the property is sold, typically after death or if the borrower goes into long-term care.
Alternatively, a relative could take over the mortgage and get a good headstart on the property ladder.
Most equity release mortgage schemes have a fixed interest rate, but even so this is something to check with each mortgage lender.
What to Look for in an Equity Release Mortgage
One of the most important things to look for when considering this type of mortgage is a scheme which guarantees the outstanding debt will never
be more than the property is worth, regardless of how much interest is accrued and how the property market changes. Interest can build up quickly, so this is a particularly important point. Look for a scheme that is approved by Safe House Income Plans (SHIP). Plans approved by this trade body guarantee that negative equity cannot occur, and the equity release mortgage will not pass any debt on to the estate after death.
Because individual circumstances are unique, it’s wise to consult a financial advisor before making a final decision on whether or not to get an equity release mortgage – like any other mortgage this is a significant financial commitment.