Equity Release Information
Equity release is an option for those over the age of 55. It involves taking some of the money tied up in the value of your home. The money can be taken as a single lump sum or in several smaller installments. You can also take them as a combination of both.
Equity release must be considered carefully.
Equity release will reduce the value of your estate and can affect your eligibility for means tested benefits.
‘WPP Financial Services can help you with equity release information’
It might be a better option to downsize your property and buy a smaller and cheaper home allowing you to have net cash in the process which we can help you with too.
Other factors to consider are the additional financial costs including agent fees and removal costs.
There are two equity release options:
– Lifetime Mortgage
– Home Reversion
Equity Release Option 1 – Lifetime mortgages
A lifetime mortgage is exactly as it sounds and the most common option. It is a mortgage that isn’t paid off until you die. This may be an option if you have no one you would like to leave your asserts to, or need to prioritise your own standard of living at the effect of reducing the amount others would inherit from you.
This is the most common option and is available aged 55+.
These mortgages have previously involved interest only mortgages and not included repayments in contrast to a typical mortgage.
Lifetime mortgages are taken out on the home you live in as your main residence. You can choose to protect some of your property value for your family’s inheritance. Usually you don’t have to make any repayments while you’re alive, and the interest adds up.
The Equity Release Council
The Equity Release Council help to protect those with lifetime mortgages and ensure that interest rates are fixed or capped for the lifetime of the policy, you can move to another property if desired (with certain conditions, you can live in your property for the lifetime of the mortgage and that the product has a no negative equity guarantee.
Repayments
Some lifetime mortgage options do allow you to pay back the interest and some even repayments on the capital loaned as well. You can also acquire a mortgage that allows you to take out equity in instalments which can help reduce the interest owed on the whole amount. Quite often you can borrow up to 60 % of the value. When you die, the lifetime mortgage including the loan amount and any interest is paid back.
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Equity Release Option 2 – Home reversion mortgages
For these you need to be aged over 65. These mortgages involve selling all or part of your home. You’ll normally get between 20% and 60% of the market value of your home or part of your home. The mortgage provider pays a tax-free lump sum for a percentage of your home although this is usually below market value. You can remain in the property rent free until you die on the condition that it is maintained and insured. As with lifetime mortgages there is an option to protect a certain percentage for inheritance. You can retain this certain percentage which will not change as the property changes in property values. At the end of the mortgage when the property is sold, the sale proceeds are shared according to the remaining proportions of ownership.
The Equity Release Council
The Equity Release Council help to protect those with lifetime mortgages and ensure that interest rates are fixed or capped for the lifetime of the policy, you can move to another property if desired (with certain conditions, you can live in your property for the lifetime of the mortgage and that the product has a no negative equity guarantee.
Repayments
If your property value rises significantly, so does the amount the mortgage lender will receive will as well as you.
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What you should know about equity release.
Lifetime mortgages and home reversion mortgages vary from lender to lender. You will also need to consider your circumstances including age, income, medical conditions and the loan amount you want.
‘WPP Financial Services can help you with equity release information’
As we are all living longer, if you take out a lifetime mortgage the costs could end up more expensive in the long run, so this is something to consider.
Equity release might seem like a good option if you want some extra money and don’t want to move house but it can have some negatives.
Lifetime and home reversion mortgages can be more expensive in comparison to an ordinary mortgage with higher rates of interest. Home reversion plans also often give you less than the market value of your home.
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