There are so many equity release products, you get lifetime mortgages or home reversion plans. But, according to research, cash lump-sum lifetime mortgages as a type of equity release plan, (the most popular type of equity release plans), offer you access to a portion of the equity that has built up in your home in the form of a lump sum. A tax-free lump-sum can be in your future!
In the UK, a homeowner over 55 unlocks £91,667 tax-free cash every 12 minutes.
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If you’re considering equity release schemes, this is a great way to find out how much cash you’ll get access too! Find out now:
Step by Step Guide to Using Our Lifetime Mortgage
Let’s look at what you’ll need to put into the calculator:
- Your age (or the age of the youngest borrower so that your provider can estimate your life expectancy)
- Your full name
- The value of your property (it needs to be the open-market value if it were to be sold now, and this will affect your repayment charges)
- The type of property (is it your primary home, your second or holiday home, or a buy to let investment property)
- Mortgage balance (meaning the outstanding mortgage balance you have on your house)
- Additional charges (this is any other secured loans against your house like a secured, a bridging, or a business one)
It’s as simple as that! You’ll then be provided with an estimated amount you can borrow through equity.
The Calculator Results
It will then show you your results regarding your mortgage equity release loan. In other words, it’ll show you how much you’ll be able to take out by borrowing from your home or property you’re living on. It’ can also show you how much you’ll save with a few scenarios: when you’re making repayments and when you’re not making repayments, for example.
This way, you can see how much money you’ll save as a homeowner and how much you’ll need to repay lenders to save that amount, as well as how much that amount will be able to be. And, the money you save will be or could be inherited by your family.
Why Should I Enquire?
Advice services are always safer: ask for financial advice from a professional.
Let me tell you…
Finances are always risky if you don’t know the risks involved. Some qualified equity release providers or lenders even demand that you speak with an adviser before you’re allowed to borrow against your properties. Your financial adviser will be able to tell you whether you should take out a lifetime plan or a reversion plan, for example.
Best of all:
They’ll tell you everything you need to know about the pros and cons of both. Even though lifetime mortgages are more sought after, reversion plans might suit your needs better.
Are You Eligible?
So, if you’re considering it but you don’t know if you qualify for it, here’s what you need to know.
Let me tell you something:
Equity refers to your property’s items/parts that let you access your money tied up in your house. However, you can only gain access once you’re 55 years or older. You can get the capital value of objects in your home as a lump sum or an income based on the house’s value. You’ll just need to repay that money you accessed at a later stage.
Ask yourself this:
Have you been struggling to meet your lifestyle needs, or you need some extra finances to cater to your lifelong dreams? Are you a UK resident, over 55 years, and own a homeowner worth more than £70,000?
Are You Considering Equity Release?
How Does Equity Release Work?
Want to know more detail? As we’ve mentioned, there are two types of equity for you to choose from.
The first type is a lifetime mortgage. This type lets you take out a mortgage on your home if it’s your primary residence.
You can also make repayments or let the interest increase. Better yet, if there’s any amount or any accrued interest, it’ll be paid back when you pass away or need long-term medical care.
The second type is a home reversion, which means you sell some of your property or your whole property. You can sell it to someone like a home reversion provider, and they’ll pay you a lump sum for it, but they can also pay you in regular payments as a regular income for you. It’s your choice.
Naturally, you will want to allow your application to progress as timeously as possible. What factors, and how do you ensure your application moves as fast as possible?
You also qualify by these three aspects when it comes to equity release schemes:
Your Property Type
Some providers or lenders have specifications about your property. Some might deny an equity plan if your property has a flat roof, for example, or if it’s in a high-flood area.
As mentioned before, some lenders differ from others. You’ll need to research all the different lenders out there to determine their requirements, terms, and conditions before deciding on one. Some lenders don’t offer any negative equity guarantee, which is quite essential and benefits you, for example.
This guarantee protects you and your properties so that you don’t pay more than you owe to your provider. However, when your lifetime mortgage plan comes to an end, the lender will sell your house and settle the amount you’ve borrowed plus any interest.
If the estate market value decreases and the money can’t repay your mortgage, the lender won’t request more funds from your estate or heirs. Since you’ll be protected by the ‘no negative equity guarantee’, they aren’t legalized to do so. Therefore, consider the firm that will offer you this protection.
Also, note that some lenders might have a clause about your means-tested benefits as well. It’s always advisable to ask for equity release advice.
How Efficiency Is Your Solicitor
Ensure that your solicitor is a professional and helps you and not make money for themselves. Get an expert solicitor to help your process along faster.
Your Different Repayment Options
When you borrow money on your property, you have two repayment options for your equity release product to choose from—roll-up interest or interest only.
When you choose a roll-up interest plan, you don’t need to make monthly repayments for your loan period. The interest is added to your initial amount, usually on an annual basis. If you don’t repay early, any interest accrued plus the original amount will be deducted once the property or properties sell or when you move into long-term care.
When you choose an interest-only plan, you have the option to repay everything or just some of the interest every month. By doing so, you’ll reduce the overall amount you borrowed because interest won’t accrue monthly.
If you pay all interest every month, the repayment will be for the initial amount at the end of the agreed period.
8 Things to Keep in Mind
You can get all these fantastic benefits from equity release:
- Boost your retirement savings or regular pension pay-outs (or both!).
- Improve your life or boost your health for years to come.
- Pay off existing debts such as personal loans and credit cards.
- Offer your loved ones a gift or inheritance.
- Pay off the interest portion of your lifetime mortgage.
- Go on that cruise you’ve been dreaming of for years.
- Hire a landscaper and make improvements to your garden.
- Renovate your home.
Some Common Questions
Typically, you can get between 20% and 50% of the value of your home. Nevertheless, this is determined based on:
- The age of the youngest borrower
- Your property’s value
- Your medical condition
The amount of cash you can release depends on:
- age of the youngest borrower,
- current property value,
- whether you have any pre-existing health issues.
You should, initially, only take what you need. Remember that there’ll be consequences to drawing more than you need.
Each plan is different. However, you need to be aware that most plans use compound interest, which can escalate.
The percentage of your properties that you can borrow with a lifetime mortgage against will depend on your age (the older you are, the more you can borrow).
At 65, for instance, you can usually borrow 25% to 30%. If you’re, however, older, you can borrow as much as 50%.
There are also minimum mortgage amounts – which can range from £15,000 to £50,000.
If you’re seriously considering or wondering about taking out an equity release plan, this calculator is an excellent tool to use. It’ll show you how much you’ll be able to save when you make repayments, and it’ll show you how much you’ll save without making repayments. You can then compare and assess if it’s a good option for you or not.
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