Your home is a valuable asset to you and with no mortgage is something you may want to leave to your next of kin. However, occasionally you may need to access some of that money straight away. If you are 55 or over, equity release allows you take money immediately from the value of the property without you having to move out of the house or sell.
Equity release can be useful if you are facing unexpected expenses but can come at a high cost. Key Mortgages can talk you through the terms and benefits of equity release before you take this further to be a life commitment.
What are the benefits of equity release?
The money you release will be tax-free and can be used for anything you deem important or unable to fulfil with savings alone.
This might include:
- Paying off your mortgage or debts
- Making retirement more comfortable
- Helping your family
- Home improvements
- Topping up your income
What are the different types of equity release?
When talking over equity release with an expert they will go into detail on the options available, and how they will benefit and affect your home in the future.
Lifetime mortgage
Being the most popular option, this is only available to those aged 55 and over and different to a standard mortgage. You will borrow some of your value at a fixed interest rate, no payments need to be made until the house is sold or when you die. The interest will be added on at this point.
Home reversion
With this option you can sell part or all of your home to a home reversion provider in return for regular or a one off lump sum payment. From the age of 65 you will be able to live in your home rent free providing you can keep it maintained and insured.
What are the alternatives to equity release?
Moving to a cheaper home and downsizing could mean you can live off the profit made from your previous home with fees considered. A cheaper and more comfortable home will be appreciated more as you age. Mortgages are also becoming widely available to older borrowers and is another option which is a lot less costly than equity release.
Questions & Answers
Equity release affects the overall value of your property, which is why you should consider the long term and if you are planning to leave your home as inheritance.
Yes, you can move properties and mortgages with an equity release plan if your lender approves the new property. However you should be prepared for early repayment charges.
There are 4 forms of equity release. Home reversion plans, lump sum life mortgages, interest only lifetime mortgages and life time mortgages with flexible cash release.
We are not authorised to provide advice for equity release products. This will be passed to a suitably qualified and authorised specialist. To understand the features and risks ask for a personalised illustration. An equity release product will reduce the value of your estate, will not be suitable for everyone and may affect your entitlement to state benefit. Depending on the adviser you are referred to, there may be a fee for equity release advice the value of which will be confirmed at any initial meeting.
A Lifetime Mortgage will reduce the value of your estate and may affect your entitlement to means-tested benefits and tax status. The impact of not servicing monthly interest payments on a Lifetime Mortgage is that the outstanding debt can grow rapidly, thus reducing the value of your estate. For example, if the interest rate was 7% a year, a £50,000 loan would double to £100,000 after 10 years assuming no repayments are made. This is an example for illustrative purposes only and personalised advice and recommendations should be sought from a qualified professional. You are strongly advised to register a lasting power of attorney. This will allow your affairs to be managed by somebody else if your mental abilities significantly decline.