Skip to content
Home > What is equity release?

What is equity release?

Equity release is a significant financial investment, and knowing the implications for your family and you is crucial. Here’s a brief overview of the most important aspects to consider.

What is the process for equity release?

The equity release process is method to take cash out of the worth of your home when you’re 55 or older, and without needing to relocate.

It’s a loan for the long term that will eventually paid back with your home after you pass in death, or require long-term care. In the meantime, you’ll be an owner of your home and not have to leave your home.

The kind of equity release that we provide is referred to as the lifetime mortgage. You can choose to receive an uninvolved lump sum as well as a lump sum, with a cash reserve that you can draw on in the future.

Why should you choose an equity release?

The most common reasons for taking an equity release could be to:

Adjust your home to ensure you can live in your own way
Renovate or remodel parts of your house
Make sure you are getting the most from your retirement
Pay for one-time medical bills or continue to receive treatment at your home
Aid children and grandchildren by assisting by assisting with deposits for the house, weddings , or other important occasions
Take care of your wealth, estate and tax planning and leave an inheritance
Repay an outstanding mortgage and the shortfall from an interest-only mortgage
Spend money on leisure activities such as a brand new car, an excursion, or even visiting relatives overseas.

Our lifetime mortgage

You can take out a one-time cash amount, starting at £15,000. It could be used for particular purposes, like increasing your retirement income, as well as helping your kid make an offer on a home.

You can also borrow an amount of money, in the beginning, starting at £10,000, and then set up an emergency cash reserve that is at least £5,000, to draw money from whenever you want to draw. There is no interest on money that you don’t draw from your cash reserve. The financial advice you receive when establishing the initial loan also applies to the funds that is in your reserve therefore you are able to draw cash from your reserve without needing to seek out additional financial advice.

What is the interest I will have to pay?

In contrast to a traditional mortgage there are no payments on a monthly basis with a lifetime mortgage as the interest is built over the loan each year. The interest is calculated on the entire amount borrowed and any interest that was previously added, which can quickly increase the amount you have to pay (compound rate of interest). We add the compound interest to your account every year.

Let’s say you took the lump-sum lifetime mortgage of £30,000 with 4.16 percent interest. When you finish your first year your total amount of interest would be £1,248. That would leave your outstanding balance to be £31,248. When you reach the end of the second year we’d be charging 4.16 percent interest, however we’d base it on the closing balance from the prior year that was £31,248. The interest would be £1,300. This would be added to the balance from last year and you’d have an outstanding balance of £32,548.

The loan and the interest are paid in full, typically through the sale of your house, if you (and your spouse in the case of jointly-owned mortgages) die or enter to long-term health care.

The rate of interest and the amount you can take out will be determined by your personal circumstances, including your health, age and the value of your home.

Are I eligible to release equity? And is my house eligible?

Equity release isn’t for everyone and every home therefore it is dependent on your personal circumstances and needs.

You may be eligible you are eligible if:

If you’re a homeowner of 55 or older. If you’re married, an civil partnership, or are cohabiting, you’ll have to be 55 or older and have the property jointly
You reside permanently in your home. Your home must be your primary residence and must not be vacant for more than six months at a time.
You’re not mortgage-free, or have only a one small mortgage. The remaining mortgage has been paid for in order to be eligible for getting a lifetime mortgage. This can be done from the amount you borrowed
The property you own is located in the UK (not including the Channel Islands or Isle of Man) and is worth at least the minimum of £75,000. If you own a leasehold home, you’ll figure out the amount you can take out based on the number of years left on your lease , and a proportion of the value of your property. We have lending guidelines which help us decide which properties we’ll accept.
You’re looking to borrow at least $15,000, and you’re worth of home allows this to be done.

Can I pay off my mortgage in full before the end of my life?

A lifetime mortgage isn’t intended to be paid in full prior to the time you (and your spouse in the case of jointly mortgaged) die, or if you are forced to move into long-term care.

What is the maximum amount I can take out, and do I get the loan all in one go?

If you’re eligible for a life-time mortgage the amount you are able to get depends on your age, the type of product choices you select, as well as the value of your home.

You could receive an uninvolved lump-sum amount or a lump sum with a reserve of cash to draw from.

If you’ve got a lifetime mortgage, you might be able to borrow additional cash in the future. It is contingent on the worth of your home, the you’ve borrowed in the past and the lending requirements and the loan’s availability at the moment. You’ll have to seek advice on your finances and could have to make a payment for your home to be appraised.

What else can I do to get the money I require?

Most people believe that their house is the most valuable asset they have and that’s the reason why people might want for ways to make money.

If you do have funds in savings, pensions or other investments, you should be looking into whether these might be a better option for financing your plans for the future than equity release. There are risks and costs that come with releasing money through a life-time mortgage and the advantages, and examining alternatives with a financial advisor should be an integral element in your decision-making process.

Can we get equity release in two people?

Yes. If a couple takes out an Equity release plans, the plan will end when the second party dies, or both of them permanently enter long-term care.

The loan is then planned to be paid back in full, typically through the sale of your property. You will still be the owner of your property until the time it is.

What are the advantages from equity releases?

Here are some reasons to consider a life-time mortgage:

You’ll still own and reside in your house, and you’ll pay a fixed rate of interest for the entire period of your mortgage
You’ll receive a lump sum and could be able to release additional money in the near future, subject to the terms and conditions
A “no negative equity” assurance means that neither you or your estate will ever be required to repay more than the property has been sold at, so long as the property is sold at the most reasonable price subject to the terms and conditions.
A guaranteed inheritance option can ensure that you leave an inheritance to your family (if you choose this option)
A partial and voluntary repayment option allows you to repay a portion of the loan amount
Protection against downsizing can be helpful when you are planning to relocate and transfer your life-time mortgage to a new property that isn’t in line with the current lending requirements. If you’re eligible, you’ll be able to pay off the mortgage in full without a penalty for early repayment.

Are equity release and equity releases secure?

Making a lifetime mortgage (or any other form or equity release) is a major choice, and it’s crucial to know the implications to you.

It is important to seek legal advice and consult an expert financial advisor first. They can help you determine whether it’s the right choice for you and will take into account your financial situation as well as other methods of generating cash for you, like moving downsizing if you’re not afraid of moving.

We’ve been a long-standing member of the Equity Release Council, a trade association that assists by representing those who take an equity release. It is important to choose a service who is a member of the Equity Release Council, take complete financial advice from an experienced equity release advisor who can assist you consider all of possible options and then choose a solicitor to represent you for you.

What are the risks of equity release in the case of inheritance, debts and tax benefits?

Our lifetime mortgage comes with a zero negative equity guarantee, that means you won’t leave your loved ones in the burden of our lifetime mortgage. If your home is sold at the highest price that it is able to get the estate and you will never have to pay more than the proceeds through the transaction.

While you may be able to protect a portion of the value of your home as inheritance, the proceeds from its sale will be used to pay off your mortgage for life and the amount of inheritance you leave behind will be less and that is something you might want to think about.

Be aware that the release of equity could alter your tax situation and could affect your eligibility for benefits from welfare (such like council tax assistance as well as pension credits). A financial advisor can help to explain what this could be for you. That’s why it’s important to seek out advice on equity release as everyone’s financial requirements differ.

Can I relocate with a lifetime mortgage?

Yes, provided that your new home meets the lending requirements when you apply and it’s accepted that you are able to relocate and take your mortgage for life subject to the terms and conditions.

It’s different when you’re moving from a home or bungalow to a maisonette or flat or a home that is less valuable, since you might have to pay back some of the loan.

You’ll have to pay an appraisal and application fee as well as appoint and pay an attorney to complete all the legal requirements for purchasing the new home and transfer your mortgage for life.

There is no need to pay any late fees for repayment if you transfer the loan to your new residence.

If the new home you are buying doesn’t meet our current lending requirements and you have downsizing protection, you are able to repay the life-time mortgage without a payment fee.

What happens to my life mortgage if I die?

A life-time mortgage is intended to be paid off in full when the borrower (or both you and your spouse in the case of joint ownership) die or enter long-term care.

The beneficiaries of the estate of your deceased will be provided with an appropriate amount of time to pay back the loan that is currently 12 months. The interest will build over the loan balance until it’s completely paid.

The life-time mortgage is typically paid back through the sale of the property, however that isn’t always the case if the funds are raised through other methods to pay back the loan.

In the event of not paying, it is considered an in default, which means that your legal obligation to the loan have not been fulfilled, and the lender reserves the right to take possession of the property to pay the loan amount.

What happens to my lifetime mortgage if I enter long-term care?

There is no need to pay a fee for early repayment If you are aware that you are suffering from certain circumstances or difficulties to your everyday life and that you’ve moved out of your home to receive treatment.

There is no need to leave your home because you require long-term care. Therefore, you’ll be able to reside in your home and continue to receive long-term care.