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Page served June 17, 2024

Equity Release - how does it work?

How does Equity Release work ? – Are you looking for a way to get money from your house? A lot of people in the UK are using Equity Release mortgages and lifetime mortgages to do just that. These products are becoming more popular because they let you take advantage of your property’s value. But what exactly are they and who can use them? Let’s find out.

But Before I do let me just assure you that you can trust us with your equity release advice, we are IMPARTIAL and a member of the Equity Release council, which means we abide by all their codes of conduct in giving impartial advice

Mr & Mrs B
Mr & Mrs B
South Yorkshire - 6th Feb 2024
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We recently had the pleasure of working with David Farrell the owner of Quest Finance, and it was a fantastic experience from start to finish. He had previously helped our Mum with her Equity release. So when we looked at Equity Release ourselves we knew who we could trust and not only was the service top-notch, but the personal attention and care we received made the whole process a breeze. We felt fully supported and valued as clients, and the outcome was exactly what we hoped for. We absolutely recommend David Farrell & Quest Finance– a solid 5 out of 5 stars from us!
Mr & Mrs B
Mr & Mrs B
Nottinghamshire - Feb 2023
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Fantastic service from start to finish, if i could give 6 stars I would, David explained the whole process of equity release making it easy to understand and answered any query I had immediately. I would highly recommend Quest Finance to guide you through the minefield of equity release any day . Thanks David.
Mr G
Mr G
Yorkshire - Oct 2023
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David was very prompt for appointments . Very approachable spoke in terms that could be easily understood. Explained thoroughly the step by step process of everything that was happening and the pros and cons of the product. Would highly recommend David to anyone.
Mr F
Mr F
Notts - June 2023
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David Farrell was excellent to deal with. He was always punctual, polite and very knowledgeable regarding equity release. David explained the pros and cons in a simple and understandable way 10/10 for David
Mr H
Mr HDoncaster - April 2023
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In dealing with my equity release David Farrell was absolutely superb in explaining to me all the ins and outs of the system in plain English. I would recommend him to anyone that is thinking of doing this. any questions i asked him were answered precisely.A very knowledgable gentleman thank you David..
Mr H
Mr H
Yorkshire - April 2023
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No sharks here just a gentleman who knows the business and is on your side.David will explain everything to you ,go through the market and make sure you have the most suitable deal for you .Ours was not straight forward with having a pylon near by which equity firms do not like and actually negotiated with them for a better deal than what they had stated.David is the top man believe me don’t look any further
Mr  S
Mr S
Doncaster - March 2024
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......After ten minutes in David’s company, I soon understood that he is just the kind of person to dispel many of the common misconceptions surrounding these professions. Even though his ‘modus operandi’ is strictly regulated by legislation and financial watchdogs I found him to be polite, friendly and very communicative. Before approaching David I had researched equity release for quite some time so after closely listening to his explanation of the subject and its pros and cons I was confident he knew what he was about. He was thorough, meticulous, sensitive to my needs and was very detailed in outlining .....
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Am I eligible for equity release?

To be eligible for a lifetime mortgage on your home – here are the main considerations;

There are other property checks that apply, some lenders do and don’t like such as such as proximity to commercial properties or Pylons and spray Foam insulation in lofts. And for Ex Local Authority properties the minimum  property value is typically £100,000+

So to be certain you and your property meet a lenders criteria,  it is always most suitable to pick up the phone for a no-obligation chat.

equity release calculator without personal details

Use our Instant equity release calculator without personal details or email address etc   – to give you a rough guide as to how much you could release.  This is just a broad indication, you would be most suitable advised to call us for a personalised quote based on your circumstances.

What is Equity Release used for ?

Pay off Debts / Current Mortgage
Home Improvements
Help Family on property ladder
New Car / Holidays
Maintain Lifestyle in retirement

From paying off a current interest only mortgage, nearing the end of its term –  to having ‘that little bit extra’ each month to enjoy your retirement.  Through to gifting to family to help them financially / get onto the property ladder.   The uses for a lifetime mortgage are numerous.

How Does Equity Release Work ?

How does Equity Release work? – Well it’s really quite simple;

It is mainly based on your AGE and your PROPERTY VALUE, (and in small part your health, as if you have chronic health conditions lenders may lend more – as life expectancy is shorter so they don’t have to allow for the long-term potential roll-up). 

How Equity Release works in practice – then lenders will lend based on a combination of your age and property value.  The younger you are the lower the LTV ( loan to value ) eg if you are aged 55  they might only lend up to 20% of the property value, whereas if you are 80 you might get more like 50%.

  • You apply, and based on your age, health and property value, the lender will confirm how much equity you can release ( we have a quick equity release calculator on this page as a rough guide) 
  • The lender sends a RICS property valuer  to check and confirm the property value and that it meets their criteria ( some lenders don’t like nearby commercial premises etc ) 
  • They confirm the amount they will lend to you
  • The money is tax-free and there are NO mandatory monthly payments ( you can make optional payments or service the interest if you wish).
  • Each month the interest is added to the mortgage balance, and so it slowly grows each year.
  • At the end of the deal  ( normally when you pass away or go into a retirement care home), the mortgage is repaid from the proceeds of your property sale.

What is the catch with equity release ?

Ok well first off there is no deliberate or dodgy ‘catch’ with equity release and lifetime mortgages,  they are highly regulated and come with lots of consumer protections. The one thing you have to be mindful of is the potential roll-up of interest.  As the longer the deal runs the more interest will accrue. The interest is what’s called compound interest, in other words, the interest amount gets larger as the mortgage balance gets larger. 

however you also have to factor in the potential increase in property value that could occur so in the above example  the mortgage interest in the first year was £3,000 – if however, the property prices went up by 1.5% in that year then the property value £200,000 x 1.5% = now is valued at £203,000.    

( Note the FCA require us to inform you that property prices are not guaranteed to rise each year and could go down as well as up )  So you will  have to make your own estimate on if you think property prices will rise and by how much each year. 

Equity Release and lifetime mortgage-advice-near me Doncaster and Nottingham

Lifetime Mortgages ( age 55+)

A lifetime mortgage is a unique type of loan designed exclusively for homeowners aged 55 and above. It allows you to release a portion of the equity tied up in your property while retaining full ownership. This means you can access the wealth accumulated in your home without the requirement to move.
 
How Does it Work?
With a lifetime mortgage, you borrow against the value of your home, and the loan, plus accrued interest, is repaid when you pass away or move into long-term care. The flexibility of this arrangement ensures that you can stay in your home for as long as you wish, enjoying the financial benefits without the stress of immediate repayment.
Key features of Lifetime Mortgages
Compare Equity Release lenders

We work with many of the main equity release / lifetime mortgage lenders including;

new hybrid lifetime mortgages for 2024

New in for 2024  are the ‘new Hybrid’  Lifetime deals.  These provide a mix where some of the interest is paid each month / some is rolled up.  These deals can either get you a higher Loan amount or a lower rate !

'Hybrid' Lifetime Mortgages

The over 55’s later life lending market continues to evolve, and one of the newer products is a Hybrid between a Lifetime Mortgage and an Interest only mortgage.

Under this hybrid product a customer is required to make monthly payments to the mortgage lender in respect of all or part of the interest, or part of the capital, charged on the lifetime mortgage. A customer may choose to stop making payments and from that time until the lifetime mortgage is repaid  the loan converts to a full interest roll-up mortgage.

Hybrid =  Lifetime + Interest Payment

In essence you might take out a ‘lifetime mortgage’ but have agreed to pay 25% or 50% or even 100% of the monthly interest for a number of years.  This helps stop the debt accruing. 

There are numerous advantages to these products such as.

RIO - Retirement Interest Only Mortgages

Frequently Asked Questions?

The amount you can borrow with a lifetime mortgage usually ranges from 20% upto 50% of the home’s valuation, and this is largely determined by the age of the youngest homeowner and the property type

Ok  some lenders will now consider lending on property near to a commercial business. It would be most suitable to talk to an advisor and for them to search the lenders that might lend.

The most suitable thing is send us the street screenshot / picture and tell us which property it is.

YES  you still own the house,  you still have to pay council tax and utility bills  its just when the property is eventually sold, a portion of the property value will have to go to settle the equity release mortgage balance 

Yes, we have whole of market access. As we are an impartial brokerage, and not tied directly to a group of lenders, We are good at helping people choose the right mortgage from lots of different options.  We search for the most suitable options for each person that suit their individual financial situations.

No we are a mortgage advice practice.  So we are not tied to any one lenders dels or criteria.  We can assess your case across all the lenders we work with. and find the most suitable match.

What is Equity Release used for ?

Lets look at the main uses for Equity release

Main Uses of Equity Release?

The funds from equity release can be used for various purposes, offering a versatile solution for many homeowners. Here are some of the main uses:

  • Home Improvements: Many homeowners use the funds to carry out renovations or improvements to their property. This can not only improve their quality of life but can also potentially increase the value of their home.

 

  • Supplementing Retirement Income: Equity release can provide a regular income stream that supplements pensions or other retirement savings, ensuring a comfortable lifestyle during retirement.

 

  • Paying Off Debts: Equity release can be used to clear outstanding debts, for example credit card bills or loans running at high rates,  thereby  reducing the financial burden and stress.

 

  • Gifting to Family: Some homeowners choose to gift a portion of their property’s value to their children or grandchildren, perhaps to help them onto the property ladder.

 

  • Funding Long-Term Care: As healthcare costs rise, equity release can provide the necessary funds to cover these expenses without the need to sell the family home.

Alternatives to Equity Release?

Downsizing or Moving to a Cheaper Property

One of the most direct alternatives is to sell your current home and move to a smaller, less expensive property. This approach enables you to release equity tied up in your home while eliminating or reducing mortgage payments

Remortgaging or Retirement Interest-Only Mortgages

Remortgaging or opting for a retirement interest-only mortgage are other options. With remortgaging, you borrow against the value of your home with the understanding that the loan will be repaid while you’re still alive. A retirement interest-only mortgage is similar to a lifetime mortgage but with the key difference that you make regular interest payments, so the amount you owe does not increase

Renting Out a Room

Renting out a room in your home is another way to generate extra income without needing to sell or borrow against your property. This option can be particularly attractive if you live in an area with high rental demand .

Selling Assets

If you have other valuable assets, such as a second car, jewelry, or collectibles, selling these can provide a lump sum of money without impacting your home ownership .

State Benefits and Grants

Depending on your circumstances, you may be eligible for state benefits or grants that can help support your financial needs. It’s worth exploring what assistance may be available .

Continue Working or Starting a Small Business

Continuing to work during retirement, whether part-time or on a consultancy basis, can provide an income stream. Similarly, starting a small business based on a hobby or skill can also be a way to generate extra income .

It’s crucial to consider all options and seek professional advice before making a decision. Each alternative has its pros and cons, and the most suitable choice will depend on your personal financial situation and long-term plans.

Main Uses of Equity Release?

Lets chat !

If you gave us a quick call? We could chat about whatyou are looking for.  Or schedule a call back
Call Back
Pros and Cons of equity release mortgages

Equity release mortgages and lifetime mortgages can be attractive options for homeowners looking to tap into the value of their homes. However, they are not without risks, and it’s crucial to fully understand these before deciding to proceed. It’s often a good idea to seek advice from a financial adviser when considering these options.

The deals for lifetime mortgages can vary, with most deals charging between 4% and 7% at the time of writing. The interest is also compounded, which means it grows quickly over time

Talk to a specialist

Let us help you, talk to an expert mortgage advisor about your holiday let mortgage needs and benefit from their expertise in finding you a great deal.

One Tailored recomendation

Let us help you, with tough additional criteria for these types of mortgages . Let us help you find a lender that WILL LEND on your chosen property, at the most suitable rate for your circumstances

Advice & Guidance

Every step of the way, from initial enquiry, through to meeting lenders criteria, the application and through to completion. we will be at your side

Conclusion

Equity release mortgages and lifetime mortgages offer a valuable financial solution for homeowners aged 55 and over in the UK. Whether it’s to supplement retirement income, fund home improvements, or support family members, the flexibility these schemes offer is undeniably attractive. However, as with any financial decision, it’s crucial to seek professional advice to ensure it’s the right choice for you and your circumstances.

Remember, your home is more than just a property; it’s a valuable asset that can support your financial health in later life. By understanding and leveraging equity release products, you can make your home work for you.

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equity release calculator without personal details