equity release lifetime mortgages FAQs

Equity Release Lifetime Mortgages FAQs

Equity release lifetime mortgages are a popular product that provides the capacity to draw down money from your property in one lump sum or with the ‘drawdown’ facility, allowing you to access small amounts as and when needed.

What is equity release? .

Equity release is a way of accessing funds from your home without having to sell it. The cash can be used tax-free for home improvements, income supplementation or long-term care expenses.

However, it’s essential to comprehend the risks associated with equity release and seek professional financial advice before making any decisions. Your adviser should clearly outline how it could affect you financially and only endorse it if the benefits outweigh the potential downsides.

Lifetime mortgages are the most popular equity release plan, and they involve borrowing money secured against your property. The loan is usually repaid from the sale of your home when you pass away or move permanently into residential care.

The lender needs to guarantee you are the sole owner of your property and there are no other mortgages or charges on it. Doing this helps avoid ‘negative equity’ which could arise in case of death or long-term care, when money received by your estate won’t be enough to satisfy all debt owed.

Is equity release safe

Equity release is a secure way to unlock cash, provided you use an established provider who belongs to the Equity Release Council. Their strict code of conduct protects customers and guarantees borrowers can utilize their home-purchase money efficiently and safely.

Recently, the industry has grown rapidly and strengthened consumer protections. Products sold by providers who are members of the European Rating Council must meet a range of ERC requirements, such as a no negative equity guarantee that ensures you won’t owe more than your property is worth when sold.

Another essential requirement of lifetime mortgages is their flexibility in repayment options, so you can pay your loan off partially or fully depending on how your circumstances change. Providers offering new lifetime mortgage plans that meet ERC standards must be able to offer this with no fee for partial early repayments.

Releasing the equity from your home can be a beneficial tool in maintaining a comfortable lifestyle as you age, and can even serve to pass on an inheritance to those closest to you. But it’s always wise to get expert advice first so that you select the correct product and avoid leaving more debt behind than desired.

Can I take out a lifetime mortgage if I’ve not pai

Equity release lifetime mortgages can be a great source of extra funds when needed. They’re ideal for those who may have trouble purchasing their dream home or must clear large debt on their current property.

Lifetime mortgages allow you to borrow against your home and have it paid back when you pass away, move into long-term care or sell the house. Interest is compounded on the loan until it’s paid off, with any leftover funds going directly into your estate.

Some lifetime mortgages also give you the option to make occasional lump sum repayments, which can help keep the balance under control. However, it’s essential that you understand any early repayment charges and how they could affect your benefits.

Some equity release lifetime mortgages also feature a downsizing protection feature that waives any early repayment charge if you sell your current property and buy another as your primary residence. This could help save on moving costs such as surveys, appraisals and legal fees.

Am I eligible for a lifetime mortgage? …

A lifetime mortgage is an equity release plan that offers access to a lump sum without making monthly payments. The loan and interest are compounded over time, and are repaid by your estate upon death or long-term care if either party passes away or enters long-term care.

Loan amounts and lending criteria vary based on your age, property value and whether any other debts are secured against it. Typically, you can borrow up to 60% of the value of your home.

Some providers provide a ‘no-negative equity guarantee’, guaranteeing that no more than the property’s final selling price must be paid back, even if you owe more than what your home is worth.

Alternatively, you could take out a lifetime mortgage that allows you to repay a fixed percentage of the borrowed amount each year. This prevents compound interest from building up and increases the overall loan amount. Ultimately, this could prove more cost-effective in the long run and save thousands in interest charges.

Do you still own your house with equity release?

Equity release is an effective way to unlock cash from your home that you can use for paying off debts, buying a new car, going on vacation abroad, gifting the kids something special or improving the property. But it’s essential that you consider what impact equity release will have on your family members.

A lifetime mortgage allows you to access the equity in your property without having to sell it. This type of loan is especially popular among pension-age homeowners, and providers offer up to 55% of your home’s value as loan amount depending on provider criteria.

It’s wise to seek independent advice from a financial adviser or mortgage broker who specializes in equity release. They can determine if it’s the best option for you and find you the most competitive deal available. Furthermore, they will inform you about potential risks and costs associated with equity release.

What are the disadvantages of equity release?

Equity release can be an excellent way to access a substantial sum of cash without having to sell your home. You could use it for many purposes, such as helping out family members, paying off debts or improving your property.

But there can also be drawbacks, and you should be aware of them before opting for an equity release scheme.

First and foremost, the interest rates on a lifetime mortgage tend to be higher than conventional loans. Furthermore, it has a ‘compound’ interest rate, meaning your debt amount could increase substantially over time.

That means your debt could balloon exponentially in the long run, potentially leaving you or your heirs owing more than the value of your home itself.

Equity release schemes may seem less appealing for younger borrowers, but it’s essential to remember that there are safeguards in place in case you pass away or need to enter long-term care before the scheme is complete.

Can I still leave an inheritance ?

Lifetime mortgages are a popular way to access the equity in your home, but many people worry about how these plans will impact their families’ inheritance rights.

If you have chosen an equity release lifetime mortgage, your estate must repay the original loan plus interest when you pass away (or second death if there was a joint plan). This payment is made from the proceeds of selling your home.

Your property’s value may decrease due to an equity release plan, and your family may not receive the full amount that would have been received had you not used one.

Avoid this scenario by opting for a lifetime mortgage that offers the ‘no negative equity’ guarantee. This guarantees your estate never owes more than the property is worth when you pass away, thanks to paying off your equity release mortgage at your death.

Another option is a voluntary repayment plan, which lets you pay back some or all of the interest in small amounts on a monthly basis. This avoids the rolled-up interest that would normally accompany an equity release lifetime mortgage and increases the likelihood of leaving an inheritance to those you care about.

Why is equity release refused?

Equity release applications are typically denied due to non-compliance with lender criteria, such as location, value, construction type and condition of the property.

The lender will consider these factors when making their decision about whether or not to proceed with your application. In some instances, they may request additional information or conduct a survey before making their final determination whether to lend against your property.

Some properties may be declined because they don’t meet lender criteria, such as those with partial flat roofs or certain insulation products inside. Other reasons could include an ex-local authority flat or house built on contaminated land.

When applying for equity release, it’s wise to select a firm that is part of the Equity Release Council (ERC). They’ll adhere to FCA rules and guidelines related to this option, helping make sure it’s an accessible one for you.