The ‘equity’ in a property is the difference between the property’s value and any mortgage, or other debts, held against it. So if your home’s worth £1 million, and you’ve got an outstanding mortgage of £300,000 on it, the equity in your home is £700,000.
Equity release is about making some, or all, of this money available to you in cash, while you continue to live in your home.
Equity release isn’t the same as an equity withdrawal, where you get money by remortgaging your home. Neither is it the same as a sale and rent back, where you sell your home to a landlord or a property company and rent it back from them.
It’s not something to rush into
Taking out an equity release plan is a major financial decision and a long-term commitment. You must get independent specialist advice first.
You need to:
- work out if an equity release mortgage is right for you or not
- see if equity release will affect your tax position, or entitlement to means-tested benefits, and
- Find the most appropriate product for you in the market.
- You should also consider discussing it with your family, as an equity release mortgage will reduce the value of your estate.
At Largeequityrelease.com, we can give you the advice you need, and help you through the whole process.
The most common type of equity release plan is the lifetime mortgage, especially for properties of larger value.
A lifetime mortgage is a long-term loan secured against your home. It’s like a normal mortgage in some ways, but quite different in other ways. Here’s what you need to know.
- The interest rate’s fixed, and there’s no set term.
- You don’t make any monthly repayments. And you don’t have to make monthly interest payments if you don’t want to –the interest can all be paid when the plan comes to an end.
- The mortgage is repaid when your property’s sold – which is usually when you and your partner have both passed away, or have moved into long-term care.
- Until then, you’ll continue to live in, and own your home, and your estate will benefit from any house price rises.
- You can get a no negative equity guarantee, meaning you’ll never owe more than the value of your home.
- The Financial Conduct Authority regulates lifetime mortgages.
There are three types of lifetime mortgage:
This is the most straightforward lifetime mortgage. You take all the money in one tax-free lump sum, and interest is due on the full amount from the day you borrow it – regardless of when you use the money. Interest will roll up over the lifetime of the plan, so it’s worth noting that the size of the mortgage will grow over time.
This is more flexible than the lump sum lifetime mortgage: it gives you the freedom to take the money when you like. And because interest’s due only on the money you’ve taken, not on the amount you can borrow in total, you could save thousands of pounds in interest over the lifetime of the plan.
This is like the lump sum lifetime mortgage, but instead of letting the interest roll up over the lifetime of the plan, you actually pay the interest due each month. This means the amount you owe will stay the same, which you and your family might be more comfortable with.
Contact us today to learn more about equity release and the various lifetime mortgage options available to you.