If you are over the age of 55 and looking for a way to improve your finances, whether you want to finally book your dream holiday or pay off some outstanding debts, then an equity release mortgage may be a good option for you.
What is An Equity Release Mortgage?
An equity release mortgage is when capital that is tied up in your home is released to give you some extra money to fulfill your financial needs. Even though the cash is released, you still get to live in your home and depending on the type of equity release you go for, you may not need to make any monthly repayments until the end of the mortgage term.
However, one thing to note with an equity release mortgage is that it will reduce the value of your estate, something that should be well considered before you go ahead with anything.
So, What Are The Different Types of Equity Release Mortgage?
There are three main types of equity release mortgage, a lifetime mortgage and a home reversion plan.
On this particular type of equity release plan, you receive your payment as a lump sum and the interest is ‘rolled up’, so you pay what you earn (the interest and the actual loan amount) when the property is sold. The rolled up interest also means you don’t have any monthly repayments to be mindful of.
Home Reversion Plan*
With a home reversion plan, you will sell all or part of your home for a tax-free lump sum of money or regular income amount, in order to fund your financial needs. With the guaranteed lifetime lease that comes with a home reversion plan, you will be able to stay in your home for free until you die, without having any monthly repayments. When you die, the house will be sold and the lender will get back their percentage that you borrowed initially.
Having this amount of money at once can be quite overwhelming and therefore, you may want to look into a drawdown plan. A drawdown plan is a flexible type of equity release plan which means you can release the funds as and when you need them. This way, you can reduce the amount of money you owe after the plan ends because you only owe interest on the funds that are actually withdrawn.
Who Can Get An Equity Release Mortgage?
There are a few factors that are essential when it comes to getting an equity release mortgage:
- You must own your home and be willing to release up to 60% of its value.
- How much you can release usually depends on your age and the value of your property.
- You must be aged between 55 and 95.
Why Would You Get An Equity Release Mortgage?
Getting an equity release mortgage is not a decision that should be taken lightly, as we mentioned previously, you will essentially be reducing the value of your estate. However, you will still be able to live in your home if you have an equity release mortgage and it can be a useful alternative to a standard loan if you wanted to:
- Pay off any debts
- Go on the holiday of a lifetime
- Give a member of your family a helping hand financially
- Redecorate or extend your home
Essentially, the options are endless because it’s your choice on how you and why you spend the money.
‘Equity release includes Lifetime Mortgages and Home Reversion Schemes. We can advise and arrange Lifetime Mortgages and will refer to an approved specialist for Home Reversion schemes’.
*This service is offered by referral to a third party