In this article, Andrew our qualified Independent Financial Adviser and equity release specialist, looks to provide a simple overview of Equity Release.
Generally, people retiring today are living longer and this means more people are relying on the equity in their home to provide them with the capital to enjoy this increased longevity without needing to sell their home.
As we are living longer, increasing numbers of retirees find themselves with insufficient savings to make the most of their later years and for those in this situation equity release can often be the most favourable way to increase their cash savings, while retaining the right to occupy their home.
What is Equity Release?
Simply, this is using the equity in your home to realise a cash lump sum, or income. There are various ways to do this but the most popular way in the UK is with a lifetime mortgage. This mortgage is specifically designed for people aged 55 or over and allows you to release a portion of your home’s value as a lump sum, or as a regular income, while retaining ownership.
What about monthly repayments and interest charges?
One of the advantages of a lifetime mortgage is that no monthly repayments are required. Interest is charged and added to the amount you owe but if this is a concern, and if you have surplus income each month, then there are products available that let you repay the interest charged, thus keeping the amount borrowed the same.
But when will the lifetime mortgage need to be repaid?
The loan, and the rolled-up interest will need to be repaid when you either die or move into long term care. If you are a couple, the repayment is not made until the last remaining person living in the home either dies or moves into care, meaning that both you and your partner are free to live in your home for the rest of your lives. Any money left over form the sale of your house is paid to you or your estate.
What are the safeguards?
At Eastern Financial Consultants, we only use lenders that are approved members of the Equity Release Council, which set out specific products standard, all of which must be met. The standards are:
For lifetime mortgages, interest rates must be fixed or, if they are variable, there must be a “cap” (upper limit) which is fixed for the life of the loan.
You must have the right to remain in your property for life or until you need to move into long-term care, provided the property remains your main residence and you abide by the terms and conditions of your contract.
You have the right to move to another property subject to the new property being acceptable to your product provider as continuing security for your equity release loan.
The product must have a “no negative equity guarantee”. This means that when your property is sold, and agents’ and solicitors’ fees have been paid, even if the amount left is not enough to repay the outstanding loan to your provider, neither you nor your estate will be liable to pay any more.
Releasing equity from your home can be a daunting prospect, and may not be right for you, which is why Andrew at Eastern Financial Consultants provides a 1-hour free face to face no obligation consultation – at our offices in Brundall. To arrange an appointment call 01603 927760 or contact us via our email form.
If you decide to engage our services after the free consultation, we will ask you to pay a non-refundable advice fee of £600. In addition, we may also receive a fee from the relevant mortgage provider, if you proceed with our recommendation. You will always receive a Key Facts illustration when considering a particular Equity Release product, which will tell you about any fees relating to it.
Eastern Financial Consultants are Independent Financial Advisers and will consider products from the whole market on your behalf. We are not connected to any providers and work directly for you, to truly find you the best possible solution in your circumstances. Eastern Financial Consultants is an Appointed Representative of Network Direct Limited which is authorised and regulated by the Financial Conduct Authority.