Equity Release Mortgages
Equity release has been around for a long time and it’s becoming an increasingly popular way for us to help our clients.
There are 2 forms of Equity Release:
- The loan is secured against your property and you retain ownership. You can protect a portion of the property for inheritance purposes.
- Interest is charged and added to the balance, which is cleared when you (or the second applicant if the loan is in joint names) either pass away or move into long term care.
- The property is then sold to clear the outstanding balance. You can have the option to clear some interest either monthly or at your choosing, to decrease the amount owed at the end. Anything left is then passed to your beneficiaries.
- You can either take a lump sum or a drawdown facility, depending on how much you need and when and this can reduce the build-up of interest.
- As a member of the Equity Release Council, you will have a no negative equity clause.
- The older you are, the more money you can take out.
- The property is sold to the finance provider who will provide either a lump sum of money of a monthly income.
- You continue to live in the property either until you (or the second applicant if the finance is in joint names) either pass away or move into long term care. You will have a lifetime lease for the property.
- The older you are, the more money can be released against the property value.
In both cases, it’s important for you to understand what impact releasing this money can have on your tax status and/or potential state and local authority benefit entitlement (both now and in the future).
Before making any decisions, we will have discussed your current and future situation in detail. If you prefer this to involve family, friends or a solicitor, you are more than welcome to invite them to both our initial appointment and the recommendation appointment.
Between the initial interview and the recommendation appointment, I will be researching the right provider and finance to suit you, your circumstances and needs.
Case Study 1
Mrs A owned her home outright and had done for many years. She was widowed and although her son lived with her, she missed her family and old friends who live abroad. She had spent a lot of time thinking about her options and whilst she didn’t want to give up her home in the UK, she didn’t want to not spend time “back home” whenever she wanted. She had looked into ways to buy a small holiday home abroad but whichever way she looked at it, she either couldn’t raise enough money or couldn’t afford the monthly payments without it having a detrimental impact on her disposable income. Mrs A was referred to me and we talked through her situation, her plans for the future and she was able to use a lifetime mortgage to raise the money she needed to build her dream holiday home which was a dream come true.
Case Study 2
Mr B had lived with his mother until she passed away and she had left her property to him in her will. There was an outstanding mortgage and she had left some other debts. To be able to inherit the property, he needed to clear the mortgage, but he had no money to do so. We explored the option for him to take a standard mortgage in his own name as well as retirement interest only mortgage options. These were not viable due to the impact on his income and expenditure. Instead, we completed a lifetime mortgage which was completed to clear the mortgage. It also cleared the debts she had left behind and provided the money for home improvements including a new kitchen, bathroom and windows. It enabled Mr B to continue living in the house as well as improve it.
Case Study 3
Mr and Mrs C had held an interest only mortgage against their property for the last 25 years. The endowment policy they had was not profitable enough to clear the outstanding mortgage balance and the bank was calling in the debt. Mr and Mrs C had believed they would need to sell their house and downsize, moving to a new town to solve this problem. This was not their preferred option as it meant leaving friends and a community behind that they had enjoyed being part of. I was able to provide them with a lifetime mortgage to clear the balance, they didn’t have to make any monthly payments but most importantly, they were safe in the knowledge they could stay for the rest of their lives in their family home.
Mortgage and Finance Arena are Members of the Equity Release Council