Equity Release Advice
Lifetime mortgages are a useful way for people of a minimum age of 55 to release equity from their home. Taking out a lifetime mortgage can be used to supplement retirement income, fund maintenance or repairs to the home, or as part of living inheritance planning for children or grandchildren.
What is Equity Release?
Equity release allows those aged 55 and over to remortgage or sell their home, which can be an attractive option for those who are ready to retire or have retired. The term equity describes the total home market value less the outstanding mortgage amount. If you're considering releasing equity from your home, you must know how much equity you have. The amount of equity you can release is dictated by your age and the value of your home.
Released money can be used in any way you want (i.e. to pay off your loans, travel the world, make vital improvements to your home as you grow older, etc.).
Types of Equity Release Scheme
This type of equity release is the most popular. It's a great option that allows taking a loan secured against a home whilst still owning it. The money you can borrow is usually between 18 per cent and 50 per cent of the property's total value. Usually, the older you are, the more you can release. It's important to know that the owed amount will continue to grow with interest, but you can sometimes reduce this by paying off the interest as you go, and this is called an "interest-paying mortgage". If you choose not to pay off the interest as you go, you will have an 'interest roll-up mortgage' and end up repaying more overall, as the interest will compound over time. When you die or enter long-term care, your loan is fully repaid from selling your property.
If you're considering selling your home but don't want to give up your right to live in it until you die or move into long-term care, consider a home reversion scheme. With this type of equity release, you sell all or part of your property, but with a legal right to continue living in it until you die or move into long-term care. You can receive money as a lump sum or as a regular income. It is entirely up to you. Please note that you won't get the full market value of your home regardless if you want to sell all or a part of your home. Most Home Reversion Equity Release Scheme providers consider your age and state of health.
*DJB MORTGAGES DOES NOT PROVIDE ADVICE ON HOME REVERSIONS.
Why should I contact DJB Mortgages to take Equity Release Advice?
Trustworthy equity release advice can be a valuable resource for those considering whether or not to release equity in their home. It can help identify potential risks and benefits of releasing equity and provide guidance on how to do so. If you are wondering whether the equity release scheme suits you, get in touch with our equity release advisor Dean to ask any questions you might have. He will take the time to understand your financial situation, tell you whether it's right for you and recommend equity release products that are a good fit for your needs.
Dean takes a simple approach to providing simple, plain-speaking, easy-to-understand quality information and excellent service. He will walk you through the entire process, from beginning to end, so you know exactly what to expect. And if there are any questions or concerns along the way, he always stands by our commitment to providing excellent support and customer service.
What are the different types of Lifetime Mortgage?
There are currently a number of different types available. Your Financial Adviser can give you the support to help decide which one would be most suitable for you. This is a significant decision so it’s
important to be clear on your options.
This allows you to release a lump sum with no requirement to make any payments until the loan is repaid. Interest is added to the loan, with the total debt and the accrued interest payable when the property is sold.
This enables you to borrow a smaller initial sum and then agree an amount that you can borrow in the future as needed. The interest rate is based on the interest rate at the time of each drawdown and interest is only charged on the amount you have taken, so the overall cost may be lower.
Aset amount is paid to you each month and can be used to top up your income in retirement. You may be required to take a small initial lump sum and then supplement this with a monthly amount. As with drawdown, you will only pay interest on the amount that you have taken so the overall cost may be lower.
Here, you can make monthly payments of all or some of the interest and so reduce the effect of accrued interest on the total amount borrowed.
Risks Around Equity Release
A lifetime mortgage is not suitable for everyone and may affect your entitlement to means tested benefits, so it is important to seek financial advice before taking any action. If you are considering releasing equity from your home, you should consider all options available before equity release.
The interest that may be accrued over the long term with a Lifetime Mortgage, may mean it is not the cheapest solution. As interest is charged on both the original loan and the interest that has been added, the amount you owe will increase over time, reducing the equity left in your home and the value of any inheritance, potentially to nothing.
Although the final decision is yours, you are encouraged to discuss your plans with your family and beneficiaries, as a Lifetime Mortgage could have an impact on any potential inheritance. We would also encourage you to invite them to join any meetings with your Financial Adviser so they can ask questions and join in the decision, as we believe it is better to discuss your decision with them before you go ahead.
YOU WILL NEED TO TAKE LEGAL ADVICE BEFORE RELEASING EQUITY FROM YOUR HOME AS LIFETIME MORTGAGES AND HOME REVERSION PLANS ARE NOT RIGHT FOR EVERYONE.