Equity release and lifetime mortgages by Mortgage Experts Online
What is equity release and how does it work?
Equity release is becoming increasingly popular as people live longer and have stored up vast sums of equity in their property. With most of peoples wealth tied up in their property,
The main question that needs answering is; “Is equity release right for me?”
It is the job of an equity release advisor to help you decide if equity release is right for your individual circumstances. If equity release is right for you, they will be able to make a recommendation based on your current circumstances and future considerations.
Top equity release tips
- Don’t borrow the full amount in one go. The sooner you borrow, the more expensive it is, as the interest has longer to compound.
- Ensure you use a company that’s a member of the Equity Release Council.
- Get advice before you do it.
- It can affect your benefits.
What are the benefits of using an equity release advisor?
As with a standard residential mortgage, if you are only looking at one provider you will only ever be recommended products from their range.
Our MEO accredited Equity Release advisors are whole of market, with access to all equity release council lenders (as follows):
Legal & General
Our accredited equity release advisors will take the time to thoroughly understand your needs and preferences and will only ever recommend equity release if this is in your best interest.
How much equity can I release from my property?
This is down to two main factors, namely the age of the applicant (or youngest applicant when the application is joint) and the value of the property. The maximum loan-to value you will be able to access from the equity in your property will be primarily determined by age, however other factor such as health can also come into play.
To use our quick equity release calculator click here.
Can you use equity release to buy a new home?
It is not a widely known fact that you can purchase a property using equity release. You will be subject to the same loan-to-value, age limits and criteria as with a standard equity release mortgage, with the deposit making up the difference between the maximum loan and the purchase price.
This option is available for both existing homeowners, and people who do not currently own a property and are looking to get onto the property ladder.
Can I make repayments with equity release?
As a lifetime mortgage is based on a client’s age and their property value with no compulsory monthly mortgage payments, these are in no way assessed on standard affordability calculations (meaning you do not need to have a minimum income).
Many clients our accredited equity release advisors have assisted in the past have expressed a preference to pay the interest to avoid the interest rolling up into the loan – this is an option, as well as making lump sum payments off the loan, therefore decreasing the amount of interest that is added to the loan.
What are the alternatives to equity release?
As mentioned previously, equity release is not suitable for everyone. The good news is that there are other option available, mainly through the more widespread options now available for retirement interest only mortgages (RIO’s). This opens up retirement mortgage lending to more people with the more generous affordability that interest only offers, however this is still assessed on affordability (unlike equity release).
The main issue with retirement interest only is that affordability is generally calculated using the lowest income, with most lenders not taking into account widows/widowers pension – there are however a couple of lenders who are now looking to allow this income in their affordability calculations – hopefully more lenders will start to follow suit as the retirement interest only mortgage market evolves.
If you are under 55 years old and looking to release equity from your property, please visit our remortgagepage.
Equity release myths debunked
There are several myths surrounding equity release that can tend to put potential borrowers off exploring the option of a lifetime mortgage. Whereas many of these myths are unsubstantiated, there have historically been times where some of these have been fact true.
When the Equity Release Council relaunched in 2012 it was tasked with safeguarding and protecting the interests of consumers using or considering equity release. As a result, certain key areas were addressed to ensure that the below scenarios could not happen;
I won’t be able to move home.
- Equity release products are portable, meaning that the product can move property with you if you decide to move in the future – subject to still meeting the lenders criteria
- My children will inherit a debt.
- While some older equity release plans did allow borrowers to go into negative equity (meaning that there was an amount owing once the property was sold), all new plans have a “no negative equity guarantee”.
- It’s unsafe/unregulated.
- The Equity Release Council heavily regulates the equity release market, with all plan providers and advisors being subject to their guidelines.
- I’ll risk losing my home.
- You can remain in your home for life..
- I won’t be able to leave an inheritance.
- On sale of the property all remaining proceeds after repaying the loan belong to you.
If you would like to speak to a whole of market equity release advisor to discuss the options available to you then either complete our quick enquiry form or call us on 0300 124 5655.