Equity Release-Important points to consider.

* The valuation of the property – the minimum acceptable UK property valuation is £70,000.

* Any outstanding mortgage or secured loan – needs deducting from equity release calculator results to give the net release available to you.

* The homeowners health records – poor health can affect the size of the maximum lump sum available from impaired equity release lenders.

* The age of the youngest homeowner – the minimum age that any lifetime mortgage scheme can start at is 55.

The maximum amount of equity that can be released will depend on numerous personal factors and the type of equity release scheme you are searching for. Remember taking a maximum release of equity is not always the best solution, and should only be used as a guideline to establish that the amount required is within equity release guidelines.



What is Equity Release?

Equity release is a means of accessing the wealth tied up in your property. The term ‘equity release’ is generic in that it applies to many forms of equity release schemes which embrace the mechanism of releasing equity from the bricks and mortar of a residential property.

For the over 55 age group, equity release plans allow the release of equity (tax-free cash) in the form of a capital lump sum, or a series of drawdowns which can be taken as little and as often as needed.

The choice of how to spend the money is at the discretion of the homeowner and therefore no limitations apply. Equity release can make a significant improvement to the standard of living for the 55+ age group by enhancing their lifestyle in many ways

Most people who take out equity release use Lifetime Mortgages

Usually you don’t have to make any repayments while you’re alive, interest ‘rolls up’ (unpaid interest is added to the loan).

This means the debt can increase quite quickly over a period of time.

However, some lifetime mortgages do now offer you the option to pay all or some of the interest, and some let you pay off the interest and capital.

In the same way ordinary mortgages vary from lender to lender, so do lifetime mortgages.

When considering a lifetime mortgage, it’s useful to know:

  • The minimum age at which you can take out a lifetime mortgage. Usually it’s 55. We’re all living longer so the earlier you start the more it is likely to cost in the long run.
  • The maximum percentage you can borrow. You can normally borrow up to 60% of the value of your property.
  • How much can be released is dependent on your age and the value of your property. The percentage typically increases according to your age when you take out the lifetime mortgage.
  • While some providers might offer larger sums to those with certain past or present medical conditions.
  • 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 (Equity Release Council standard).
  • You 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. (Equity Release Council standard).
  • The product has a “no negative equity guarantee”. This means 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 (Equity Release Council standard).
  • 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 (Equity Release Council standard).
  • Different lifetime mortgage providers might have slightly different thresholds.
  • Whether you can pay none, some or all of the interest. If you can make repayments, the mortgage will be less costly. However, with a lifetime mortgage where you can make monthly payments, the amount you can repay might be based on your income. Providers will have to check you can afford these regular payments.
  • Whether you can withdraw the equity you’re releasing in small amounts as and when you need it or whether you have to take it as one lump sum.
  • The advantage of being able to take money out in smaller amounts is you only pay the interest on the amount you’ve withdrawn. If you can take smaller lump sums, make sure you check if there’s a minimum amount.
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