I think you’ll agree with me when I say…
There’s a lot to learn when it comes to equity release.
However, getting the right information on equity release can be a challenge.
Lucky for you, here is an Equity Release FAQ’s.
Hopefully, you will find the answer you are looking for. If not, please be sure to see below how much equity you can release or chat with us.
Equity Release Frequently Asked Questions
- Who Qualifies for Equity Release?
- How Much Equity Can I Release?
- How Frequently Can You Release Equity?
- Do You Settle Tax on Equity Release?
- Can You Release Equity with a Mortgage?
- Can I Use Equity Release to Settle a Mortgage?
- Can You Settle Equity Release Early?
- What is the Equity Release Council?
- Can You Switch Your Equity Release Plan?
You & Your Kin
- How Does Equity Release Affect Benefits?
- How Does Equity Release Affect Inheritance Tax (IHT)?
- What Happens When You Die With Equity Release?
- What are the Different Types of Equity Release?
- What is Equity Release?
- What is a Lifetime Mortgage?
- What is a Home Reversion Plan?
- What is the Difference between Equity Release & Lifetime Mortgages?
- Is There an Alternative to Equity Release?
Pros & Cons
- What are the Pitfalls of Equity Release?
- Is Equity Release a Safe Option?
- How Much Does it Cost to Release Equity?
- What is the Catch with Equity Release?
- Is There a Better Alternative to Equity Release?
- Should I Consider Equity Release?
- How Much Interest Do You Pay Back on Equity Release?
- Do Banks Offer Equity Release?
- Can You Lose Your House with Equity Release?
- Is Taking Equity from Your Home a Good Idea?
- Can Equity Release be Paid Back?
- How Do You Pull Money Out of Your House?
- Do I Pay Tax on Equity Release?
- Does Equity Release Affect Your Pension?
- Which is the Best Equity Release Scheme?
- Why Do I Need A Solicitor for Equity Release?
- What is the Most Popular Type of Equity Release Mortgage?
- What Percentage of Equity Can I Release From My House?
- Can You Get Equity Release with Bad Credit?
- What Happens to Equity When You Sell Your House?
- Is Releasing Equity a Great Idea?
- What are the Advantages of Equity Release?
- What’s the Downside to Equity Release?
How it Works
- How Does an Equity Release Loan Work?
- What Percentage Can You Get On Equity Release?
- Can I Sell My House if I Have Equity Release?
- Can You Settle Back Equity Release?
- How Long Does Equity Release Take?
- Do You Have to Settle Annuity on Equity Release?
- How Do I Know If I Have Equity in My Residence?
- What are the Criteria for Equity Release?
- Is Equity Release Worth Considering?
- Are There Any Equity Release Plans with no Early Repayment Charges?
- Is There an Equity Release Plan with a Repayment Option?
- How Does Equity Release Affect a Will?
- Can Equity Release be Mis-Sold?
- Can Equity Release be Refused?
- Can Equity Release be Repaid Before Death?
- Can Equity Release be Transferred to Another Property?
- Can Equity Release Pay Off a Mortgage?
- How Does Equity Release Affect Divorce?
- Can You Use Equity Release to Fund Your Care?
- How Much Equity Can I Release? What is the Maximum Amount I Can Get?
- Can I Take Out an Equity Release Plan for a Second Home?
- I am 50 years. Can I Take an Equity Release Plan?
- Can One Release Equity if They’re 54?
- Can One Release Equity if They’re Over the 55-Age Mark?
- What’s the Average Annuity Charged on Equity Release?
- How’s Interest Computed on Equity Release?
- Does Equity Release Require Credit Checks?
- Can You Settle a Lifetime Mortgage?
- Do I Need a Solicitor for Equity Release?
- Do Banks Offer Equity Release?
- Can I Use an Equity Release Plan to Settle Mortgage?
- Do You Need Good Credit Score for Equity Release?
- Can I Sell My House and Still Live In It?
- How Much Interest do I Settle on Equity Release?
- Can I Sell if I Have Lifetime Mortgage?
- What’s a Lifetime Mortgage?
- What’s Equity Release?
- What’s the Difference between Equity Release & Lifetime Mortgages?
- What’s a Lifetime Loan?
- How do Lifetime Mortgages Work?
- Is Using Equity a Good Idea?
- How Much Can I Borrow With a Lifetime Mortgage?
- How Does One Qualify for a Lifetime Mortgage Scheme?
- Is Equity Release Like a Mortgage?
- Can I Pay Back Equity Release?
- How Much Does Equity Release Cost?
- Can You Repay a Lifetime Mortgage?
- What’s the Maximum Age for a Lifetime Mortgage?
- What’s a Lifetime Variable Mortgage?
- What’s a Lifetime Interest-Only Mortgage?
- Can Equity Release Pay Off Mortgage?
Equity Release Brands
- Does Halifax Do Lifetime Mortgages?
- Does Halifax Do Interest-Only Mortgages?
- Does Halifax Offer Equity Release?
- Does Santander Do Lifetime Mortgages?
- Does Santander Do Interest-Only Mortgages?
- What’s the Maximum Age for a Santander Mortgage?
- Is Re-Mortgaging a Good Idea?
- Can You Move House with a Lifetime Mortgage?
- Can I Sell my House if I Have Equity Release?
- What’s a Retirement Mortgage?
- What’s a Retirement-Interest-Only Mortgage?
- What’s a Flexible Lifetime Mortgage?
- Can I Increase My Mortgage Term?
- What’s the Best Way to Release Equity from Your House?
- What’s an Enhanced Lifetime Mortgage?
- What’s a Lifetime Tracker Mortgage?
- Are Lifetime Mortgages Regulated?
- Why Equity Release is a Bad Idea?
Your Equity Release Answers
Q: Who Qualifies for Equity Release?
A: Qualifying for equity release is contingent on the maturity of the youngest person on the title deeds & also your property criteria. Lifetime mortgages1 , for example, you need to be at least 55, whereas a home reversion plan’s, at 65. You must also:
- own your home,
- or have it on a freehold basis,
- it also helps if your residence in in good condition.
It is also vital to keep in mind that the least property value acceptable in the equity release sector is £70,000 at the moment.
Q: How Much Equity Can I Release?
A: The equity you can release is dependent on:
- age of the youngest borrower,
- current value,
- if you have any pre-existing health issues.
You should, however, initially withdraw only what you need. It is vital to remember that there will be consequence to drawing more than you need. It is also unwise to withdraw equity exclusively for investment purposes. If you need more money in the future, there are schemes where you can take cash in stages, rather than all at once.
Q: How Frequently Can You Release Equity?
A: The frequency depends on:
- the existing terms,
- the outstanding balance,
- if the property value has increased since its inception.
Lenders will use a combination of you and your partner’s recent age, the property valuation, and the loan-to-value tables, to help them determine whether you can release any more funds. If not, then you can always consider alternative equity release plans.
Q: Do You Settle Tax on Equity Release?
A: No, you do not.
Equity release allows you as an asset-rich owner to unlock wealth from your residence in a large, lump sum or lesser amounts over an extended period. While there are no levy implications, there are other issues which would need to be addressed, so it is imperative that you fully comprehend all the consequences before taking out this type of plan.
Q: Can You Release Equity with a Mortgage?
A: Yes, you can.
The advantage is in how it allows you to claim rights to bricks and mortar. It allows you to build up some equity in your name as the value typically increases. However, you might find yourself struggling at some point being property rich but money tight, and that’s where equity release comes into play. It is a lifetime mortgage scheme, which gives those at 55+ to release money from their property to use as needed.
Q: Can I Use Equity Release to Settle a Mortgage?
A: Yes, you can.
However, with the equity you release, you must repay your balance first. Equity release must be the only charge listed against your home.
Q: Can You Settle Equity Release Early?
A: It depends on your plan provider.
Typically, equity release schemes are designed only to be settled if you move into long-term care or die. Defined as, if the plan is settled in full within the contract’s course, then charges may arise depending on the plan.
Q: What is the Equity Release Council?
A: The Equity Release Council is a self-regulated non-profit organisation that specialises in all things equity release-related. It was initially recognised as Safe Home Income Plans, or SHIP until it was re-launched in 2012 and broadened its reach from equity release to financial advisers. Its roles include:
- Offering you with all the information you might demand on equity release and its products.
- Protecting you and the consumer using or considering taking out an equity release.
- Raising awareness on how equity release might be an ideal option after retirement.
- Representing over 180 member firms and over 500 people in the equity release industry, from financial advisers and lenders to representatives and surveyors.
Its members also have to abide by a strict code of conduct:
- Loanee have a right to remain in the habitation for life.
- Loanee will be offered clear, concise paperwork which includes all setup bills and changes in residence values.
- The consumer’s representative preference steers any legal work. Then he signs a certificate stating that the plan has been clarified and its clients comprehend the risks.
- The client can move their plan to another property without penalties.
- Equity Release Certificate defines the cost to the client’s asset and estate.
- Equity Release carries a “NO NEGATIVE EQUITY GUARANTEE.”
Q: Can You Switch Your Equity Release Plan?
Again, this is dependent on your preferred scheme, its on-going balance, and if any fees are due for getting out early. You first have to ensure that you conduct a switch plan analysis to know if it will be beneficial to make the transfer. Switching can be for three reasons:
- To attain lower annuity stipulations – it can hypothetically save your property over the longer term.
- To borrow more funds – if you cannot, or will not be offered more, you may need to look for an alternative lender.
- To gain more features – where old plans had limited flexibility, by swapping plans now, you can gain access to a host of fresh options.
If you have an existing equity release, it is always a nice idea to see what the sector is offering & consider switching to another plan if its terms are more favourable.
You & Your Kin
Q: How Does Equity Release Affect Benefits?
A: Equity release may not be right for everyone. It can hurt your claim to state privileges and it lowers the value of your habitation. It can alter your means-tested benefits like pension and savings and council levy. It is, therefore, vital that you fully understand your circumstances. You can also always see what you are entitled to with your Benefits Agency, the Citizens Advice, or your Local Authority.
Q: How Does Equity Release Affect Inheritance Tax (IHT)?
A: It may reduce how much inheritance levy you have to pay (your inheritance levy liability) contingent to how you use your release. There may be more fitting ways of reducing your liability, and so it is crucial to get financial guidance from a levy specialist so that they can offer you proper advice on inheritance levy planning. Nevertheless, if you wish to get more advice from a levy consultant, see how much equity you can release and chat with one as a perk.
Q: What Happens When You Die With Equity Release?
A: If you took out the equity with your spouse, the abode is usually sold once the last remaining lendee has died. If you took it on your own, then when you perish, the lenders are obliged to merchandise your property. With lifetime one, the capital that is made from the transaction is used to settle the initial pledge, plus any annuity that has accumulated. If there is sufficient value in your home or if your family members wish to repay, the lender does not have to put your property up for auction.
With a home reversion plan2 , however, a fraction of the property will be the reversion firm’s. If any piece of the residence doesn’t belong to them, then the fraction from that portion will go to your residence. In some circumstances, the percentage sold can be repurchased by other funds in the residence or for example by family members.
Q: What is Equity Release?
A: Equity release is a financial product that allows leaseholders who are over 55 to release the value in their residence by turning it into a lump sum or recurring income. It allows you to continue residing in your home until you perish or move out permanently.
Types of Equity Release
Q: What are the Different Types of Equity Release?
A: Essentially, there are two types of equity release; the lifetime one which consists of options such as the drawdown mortgage3 and lump sum, among others. There’s also the home reversion plan which involves you selling all, or part, of your home.
Q: What is a Lifetime Mortgage?
A: It is when you borrow funds secured against your property, provided it is your principal residence, while retaining full ownership.
Q: What is a Home Reversion Plan?
A: With a home reversion plan, you sell part, or all, of your property at below market value in return for a tax-free lump sum. Unlike others, you get to live in your dwelling rent at no charge – until you depart on or move into long-term residential care. Home reversion is a segment of the two primary forms of equity release. The other is the prestigious lifetime plan.
Q: What is the Difference between Equity Release & Lifetime Mortgages?
A: The central difference between the two is when you take out a lifetime plan, you still own your own home. However, with home reversion plans, you sell part or a share of your residence in exchange for a lump sum or a lifetime of return.
How Equity Release Works
Q: How Does an Equity Release Loan Work?
A: Equity release is, in a nutshell, a mode of unlocking the value of your property and turning it into a lump sum. You can do this via several policies which allow you to access – or ‘unlock’ – the equity attached up in your residence if you are over 55.
Q: What Percentage Can You Get On Equity Release?
A: Typically you would to get between 20% and 60% of the market value of your home, the average is around 35%.
Q: Are There Any Equity Release Plans with no Early Repayment Charges?
A: Every equity release plan has the inclusion of early repayment charges. However, it mostly depends on whether you already have an equity release plan and your plan provider.
For existing borrowers, for instance, most lenders use the government gilts as the basis for their early repayment charges – which can be up to 25% of the amount initially borrowed.
It’s also vital to understand what bases the percentage penalty. Some plan providers can charge it on the amount you repay, while others on the initial amount you borrowed.
Nevertheless, there are several exceptions to this rule. Some use a fixed penalty of 5% of the capital you borrowed in the first five years to 3% in the next five years, then nothing after that. If you want to learn more about this, check out ‘What is Equity Release.’
Q: Is There an Equity Release Plan with a Repayment Option?
A: Yes, there is. However, this all depends on the lender, the type of plan you choose, and when it started. For instance, the new kid on the block, the voluntary repayment plan allows homeowners to repay a portion of the scheme after the first 12 months, thus enabling you to safeguard your family’s inheritance and control the balance of your lifetime mortgage.
Instead of the interest rolling up, this non-compulsory lifetime mortgage plan allows you to repay up to 15% of the initial amount borrowed each year (dependent on the lender) with no penalty. You can read all about it here.
Q: How Does Equity Release Affect a Will?
A: Homeowners and UK residents aged 55 and above have been unlocking the value of their homes and turning it into a cash lump sum. However, how does equity release play into probate issues?
Well, since you’re taking out capital based on the value of your home, you’ll be reducing the significance of your family’s inheritance. When the plan provider puts up your home for sale, it will inevitably reduce the amount of money you leave to your family.
While it’s not possible to be in negative equity at the time of sale, the value of your estate can be more or less the same as the repayment to be made to the lender. It means that there might eventually not be much capital left when the plan term ends.
It won’t also be possible to leave an estate to your family as the rules of the equity release plans stipulate that the lender must sell the home when you pass on. Your family will enjoy the residual value as a cash inheritance.
Considering all this, you have to ensure that you re-word your Will. If it includes sums of money that you plan to leave to your heirs that are mostly based on the value of your home, since equity release will change that, you need to revisit it and update it. If you’ve, however, used percentages rather than fixed amounts, there’s no need to make any alterations since those will apply to the residual value once the lender sells your estate.
Q: Can Equity Release be Mis-Sold
A: Yes, it can. According to the FCA, some lenders do mis-sell equity release plans. If, for instance, you get an equity release plan and you haven’t met the minimum age requirement, 55, then you might have been mis-sold the equity release plan.
There are ways you can know if your lender mis-sold the equity release plan. These include circumstances like:
If you also took out the equity release scheme for over 60% of the value of your estate
If they didn’t offer you fixed interest rates on the mortgage or they didn’t put an upper limit on the variable interest rates
If the plan provider didn’t offer you the option or allow you to remain in your property for life until the plan term ends when you die or move into long-term care
If you wanted to move houses, but you didn’t discuss, or the lender didn’t offer you that option.
If there’s no provision to guarantee your mortgage when there are not enough funds after the sales costs, estate agent fees and conveyance fees
If the lender didn’t offer you advice to make some, if not all interest repayments over your lifetime mortgage plan
If the company didn’t also advise you have the option of releasing smaller amounts of cash, not just the lump sum amount
The list is exhaustive, but these are just some of the chief points that cover a mis-sell. That’s why it’s imperative to understand equity release plans exhaustively before you take out an equity release plan. Make sure that you also seek independent professional help before you get an equity release company to offer you a scheme.
Q: Can Equity Release be Refused?
A: Yes, it can. If you don’t meet the expected requirements, then the plan provider will refuse to offer you the plan.
For instance, if you don’t have buildings insurance, then some plan providers won’t offer you an equity release plan. They’ll require you to have insurance for the full reinstatement value, which should be index-linked to keep in line with inflation.
If you also don’t meet the minimum age requirement, your home’s value isn’t at least €70,000, and ensure that your home is in pristine condition, then the plan provider will also refuse to offer you the plan.
Some plan providers also take into account factors like personal health, and if you have a pre-existing medical condition, they’ll consider this. If your medical condition is likely to reduce your life expectancy, then they’ll increase your limit. You must also be honest about such factors since it can invalidate your plan if they find any fraudulent information after you pass on, thus leaving your loved ones with a nasty financial mess to clear up. You can read more on this by checking out ‘Equity Release Criteria.’
Q: Can Equity Release be Repaid Before Death?
A: If you want to – yes, you can. Nevertheless, it’s essential to reiterate that most equity release plans require you to repay the loan when you pass on or move into residential care.
For joint applications, this is typically dependent on the last Death or last applicant moving into long-term care. At this point, your plan provider can use the security they hold on your home to instigate a sale and reclaim the cash you owe them.
Nonetheless, plans like the voluntary repayment option enable you to pay back the equity release plan early, but you’ll incur an early repayment fee. These fees vary from one plan provider to another. You can read all about this by perusing through ‘Lifetime Mortgages.’
Q: Can Equity Release be Transferred to Another Property?
A: Yes, it can. Any lender that’s a member of the Equity Release Council allows the transfer of an equity release plan to a new, suitable property. However, that house must meet the contractual requirements of the lender.
Q: Can Equity Release Pay Off a Mortgage?
A: Yes, you definitely can. With estate values on a rise, equity release plans allow you to cash in on the value of your home. By cashing in this equity, you can pay your existing mortgage first before you use the rest of the cash.
The equity release laws stipulate that any homeowner with an existing mortgage or debt secured against the estate by completion – either with the proceeds of the lifetime mortgage or other savings you may have.
You must ensure that you get expert advice and think carefully before securing other debts against your estate. You have to consolidate your debts into a mortgage, and the lender might need you to pay more over the entire plan term than you would with your current debt.
Q: How Does Equity Release Affect Divorce?
A: The divorce rates in the UK have been edging up. For the couples that bought an estate together, it’s essential to understand how to calculate purchasing out your spouse’s share of the property in the event of a divorce.
If neither of you wants to stay, or one can’t afford to purchase the other out, you can always opt to sell the house and split the proceeds. However, if you don’t want to sell, taking out an equity release plan is the best option for you.
It not only allows you to free up some cash but also in buying out your partner, thus making the divorce process smooth sailing.
Q: Can You Use Equity Release to Fund Your Care?
A: Yes, you definitely can. Equity release can be the way to provide yourself with a decent level of comfort and dignity in your later life without always leaning on your friends and family.
Q: How Much Equity Can I Release? What is the Maximum Amount I Can Get?
A: You can release from €10,000 to €100,000.
However, this is all dependent on various factors. For instance, the younger you are, the less you can expect to release from the value of your estate. It’s because most plan providers have to estimate how long it’s likely to be until they can secure the final equity – your property.
If you’re, however, nearing your 70s, then you’re more likely to release a handsome amount of money since your life expectancy is low.
Another factor is your health. Most plan providers require you to offer information about your pre-existing medical conditions. If you have certain illnesses like high blood pressure, diabetes, among others, then you can be sure to unlock a considerable amount of capital.
Another factor that the lender will take into account is the actual market value of your home. The higher this is, the more you can expect to get in your payout. There are minimum value thresholds in place when it comes to this – your home has to be at least €70,000. Nevertheless, most companies impose higher minimum values of €75,000 or €100,000. You can read more about this here.
Q: Can I Take Out an Equity Release Plan for a Second Home?
A: Yes, you can. Purchasing a second home is something that most people dream about, and by taking out an equity release plan, you can finally get the funds to buy your new second home.
For legal purposes, though, you have to either be the sole occupants of your new second home or let it out for a maximum of four weeks consecutively. You must also use the estate for a minimum of four weeks every year, and should have no formal agreements or Assured Shorthold Tenancy in place.
You can also use the funds you release to offer a deposit on other properties unrelated to the buyer, like helping a loved one get on the property ladder.
Q: I am 50 years. Can I Take an Equity Release Plan?
A: If you want to release a cash lump sum from your estate and are under the age of 55, you can’t qualify for a regular equity release plan. However, you can always sort out expert advice to find alternative solutions you may want to consider.
You can read all about this by checking out ‘Equity Release Criteria.’
Q: Can One Release Equity if They’re 54?
A: For equity release plans, the older you are, the more cash you can release from the value in the property. However, those under the age of 55 are at a disadvantage. You can’t release any equity release plan if you’re below the recommended age, 55 years. If you do, then you’ll have been mis-sold on the equity release scheme.
Nonetheless, you shouldn’t worry since they are specific options you can consider, like re-mortgaging or taking out secured loans. Secured loans, for instance, have a longer repayment term than unsecured loans, thus giving you more time to straighten out your finances and get the loan paid off.
So before you throw in the towel, make sure you consult your financial adviser and figure out which the best financial move you can make before you’re eligible for an equity release plan.
Q: Can One Release Equity if They’re Over the 55-Age Mark?
A: Yes, they can. Equity release plans are for homeowners and UK residents aged 55 and above. Lifetime mortgages, for instance, are for those who are 55+, while home reversion plans require you to be at least 60 years old. You can read all about this by checking out ‘Equity Release Criteria.’
Pros & Cons of Equity Release
Q: What are the Pitfalls of Equity Release?
A: Equity Release involves acquiring equity tied up in your property against the value of your home. With lifetime mortgages, you get ‘rolled up’ interests at the end of the plan. Home reversion schemes involve selling a part of your home to the equity release provider. Check out the pitfalls of equity release for more information.
Q: Is Equity Release a Safe Option?
A: Yes. The Financial Conduct Authority regulates it, and the Equity Release Council insists that its members adhere to a strict code of conduct designed to safeguard consumers. For more information, check out ‘Is Equity Release Safe?’
Q: How Much Does it Cost to Release Equity?
A: It typically depends on the equity release provider you choose. However, equity release costs include application fees like financial advice fees, lender’s costs, property appraisal fees, and professional costs. These typically range from £900 to about £2000. There’s also the interest charged on loan. To know more, please read through ‘Equity Release Costs.’
Q: What is the Catch with Equity Release?
A: Equity release is an incredible financial option. However, it has some cons which require careful consideration. To learn more about this, check out ‘Is Equity Release a Good Idea?’ for a more informed perspective.
Q: Is There a Better Alternative to Equity Release?
A: Yes, there are, and you should consider the before you commit to taking out equity from the value of your home. For more information, check out ‘Equity Release Alternatives’ and see which option suits your situation better.
Q: Should I Consider Equity Release?
A: Yes, it is worth considering. It allows you to unlock the value of your estate by turning it into a cash lump sum or monthly income. It also allows you to:
Enjoy financial freedom as you use the money as you wish
Maintain your independence and the right to remain in your family home
Enjoy the benefit of having a warranty. It can be the warranted rates for life on the lifetime mortgage scheme or the no negative equity guarantee that ensures that any equity release scheme is adhering to Safe Home Income Plan (SHIP) regulations
For a better outlook, check out ‘Is Equity Release A Good Idea’ and decide whether it is the best financial plan for you.
Q: How Much Interest Do You Pay Back on Equity Release?
A: Interest on equity release is higher than that of the standard mortgages. It ranges between 3.5% and 7% – and that could be the fixed rate for the life of your loan. Nonetheless, the amount of interest you pay at the end depends on how long the scheme runs and the type you choose. For more information, read through the comprehensive on ‘Equity Release Interest Rates.’
Q: Do Banks Offer Equity Release?
A: Today, most of the traditional high street banks like Barclays, NatWest, TSB, and Santander don’t offer equity release products. It’s mainly because of them failing to provide their consumers with the right products in the past, and prioritizing lending opportunities across various sectors of the mortgage market like first-time buyers. There is now a reluctance to re-enter the equity release market.
As with the banks, most major high street building societies, except for Nationwide Building Society, no longer offer equity release plans. It’s because of issues with the product offering and, eventually, a lack of funding following the credit crunch.
Today’s leading equity release providers are insurance companies and finance houses like L&G, Aviva, and More2Life. These companies have been continuously successful at offering consumers a range of products that all have a unique selling point and offer various perks. The current range of equity release schemes also provide consumers with the most diverse range of equity release plans and competitive interest rates in the market.
Q: Can You Lose Your House with Equity Release?
A: No. You can’t lose your estate with an equity release plan. The ERC demands that you keep the right to sell whenever you want to and to leave it to whoever you wish to once you have settled your mortgage.
Moreover, since the ERC governs these plans, you have a guarantee that your home will always belong to you and can’t be repossessed under normal circumstances. Other mortgages may repossess your property for non-payment. So, your Equity Release lifetime mortgage is more secure than a normal one.
However, sometimes your lender could instigate repossession of your home if:
- You deliberately falsified information on your application
- You leave the estate unoccupied for over six months, without going into long-term care
- You fail to comply with the terms and conditions: failing to maintain the property routinely or not having valid Buildings cover insurance
Q: Is Taking Equity from Your Home a Good Idea?
A: If you don’t have any heirs, and are cash strapped, it can be your financial knight. It allows you to fund everything from home improvements, opening up your dream business, repaying the debts owed, all-round-the world trips and the financial freedom to spend it as you see fit.
However, it also has drawbacks since it reduces the value of your securities, meaning a reduced provision for your heirs. So, before you take a plan out, you need to consider other alternatives like remortgaging, taking in tenants, claiming your state-entitled benefits or checking your eligibility for local grants to help you improve your property.
For a better outlook, check out ‘Is Equity Release a Good Idea?‘
Q: Can Equity Release be Paid Back?
A: If you want to – yes, you can with the voluntary repayment plans. However, it’s imperative to reiterate how an equity release lifetime mortgage is designed to remain in place before you die or move out into long-term care.
Unlike conventional mortgages, a lifetime mortgage doesn’t have a set timescale where you have to pay back all the money owed plus interests in full. Two principal life events trigger full repayment, and that’s your death or relocation to residential care.
For joint applicants, this depends on the last applicant’s passing away or if he/she moves into permanent care. At this point, your plan provider can use the security they hold on your estate to instigate a sale and recover the money they’re owed.
If you choose to repay all your equity release mortgage, then it’s probable that you might pay an early repayment fee.
Q: How Do You Pull Money Out of Your House?
A: Well, there are various ways you can pull money out from your home. You can choose multiple loan options like home equity loans, home equity lines of credit, reverse mortgages, cash-out refinance, or equity release. With equity release, you only need to ensure that your home is worth more than £70,000 and in the UK. You also have to ensure that you are above the age of 55 and, for some, at least 60 years.
Q: Do I Pay Tax on Equity Release?
A: No, you don’t pay tax on equity release. The money you unlock is tax-free. However, how you choose to spend your capital could be taxable. If you, perhaps, decide not to spend it and instead hold it in several savings accounts, it could be subject to tax.
Q: Does Equity Release Affect Your Pension?
A: Equity release, as you know, affects your means-tested benefits, but it doesn’t affect your state pension. However, the guarantee credit part of pension credit, which tops up the state pension to increase pensioners’ weekly income, can be.
The guarantee credit is mainly for topping up the basic state pension of £125.95 a week for individuals to £163. You are allowed access to £10,000 before your pension credit is affected. Then, for every extra £500 in savings you have, you’ll lose £1 a week in guarantee credit.
Q: Which is the Best Equity Release Scheme?
A: It all depends on your needs. There are two ways to release the cash tied up in your property without having to move. There is the lifetime mortgage plan where you repay the money you release plus interest when the lender puts up your home for sale. That is when you die or go into long-term care. There are also no payment requirements.
The home reversion scheme involves the provider buying a percentage (or all) of your estate (at less than market value) for a tax-free lump sum. You, in turn, get a lifetime tenancy that lets you reside rent-free in your estate for life or till you move into residential care.
To learn more about these schemes, be sure to check out ‘Types of Equity Release.’
Q: Why Do I Need a Solicitor for Equity Release?
A: As equity release deals with your most valuable asset– your property, you must seek expert legal advice. With legal advice you can get help through all stages of the equity release. A solicitor will advise you as to the technicalities of the scheme and ensure you comprehend the repercussions this will have during its operation.
Q: What is the Most Popular Type of Equity Release Mortgage?
A: The lifetime mortgage plan is the most regulated equity release scheme, thus making it the most sought-after. With a lifetime mortgage plan, you get access to the principal calculated by the value of your lot. You get this capital as a lump-sum or monthly income, and in particular situations, as a consolidation.
Unlike the home reversion plan, the lifetime mortgage allows you to continue owning and residing in your house. The interest is added to the value of the credit so that the actual future borrowing fees increase over time. It means you don’t have monthly remuneration that increases; it is all deferred until refund.
You can learn all about it by reading through the comprehensive guide on ‘Types of Equity Release Plans.’
Q: What Percentage of Equity Can I Release From My House?
A: If you qualify, the amount of equity you can unlock from your estate is usually between 20% and 55% of the value of your home. However, this depends on various factors like:
How much your estate is worth – this will be determined by the property appraisal. Your plan provider will also look at the type of property construction, what materials the house is made of and if it’s a listed building. They’ll also check the condition of the property and the amount of debt secured against your estate.
Your age- If it’s a joint application, it’ll depend on the age and health of the youngest applicant.
Q: Can You Get Equity Release with Bad Credit?
A: Unlocking the equity tied up in your home when you have bad credit can be challenging. However, since equity release, unlike traditional mortgages, rarely comes with monthly repayments, your credit history is less of a factor. You can certainly get approved, regardless of your credit history. The principal reason is that you have a security form of what you’ve already paid towards your present mortgage.
Q: What Happens to Equity When You Sell Your House?
A: If you’ve been paying down your mortgage over the years, you’ll have built up equity in your property, which you can then cash in on when you sell. When your home goes to closing, between the down payment and the mortgage loan, the buyer will come with funds equal to your home’s sale price.
With equity release, selling of the house takes place when you either die or move into permanent care, and the plan provider takes the amount owed from the sale of the home.
If you, however, want to move house, you have to ensure that the estate you’re moving to offers enough security for the capital you have borrowed. Your plan provider will have to approve the transfer and that it meets the requirements of your contract.
Q: Is Releasing Equity a Great Idea?
A: Equity release could be an excellent idea if you wanting to access the value of your home, without worrying about repayments. However, it may not be such an great idea if you do not like the idea of your family’s inheritance being affected.
Q: What are the Advantages of Equity Release?
A: It enables property owners to access the equity of their residence without having to sell it, move or downsize to smaller residence. The value can be unlocked either as a one or in a series of remunerations (drawdowns), with the understanding that it will be repaid at a later date.
Q: What’s the Downside to Equity Release?
A: It involves accessing funds against the value of your residence, (with home reversion schemes – selling all, or segment of your property) and may work out to be way more pricey in the long run than downsizing to a smaller one. It may also alter your entitlement to state privileges and grants.
Q: Can I Sell My House if I Have Equity Release?
A: Equity Release schemes are becoming increasingly flexible, so it’s worth considering a plan that offers downsizing protection.
Q: Can You Settle Back Equity Release?
A: Many schemes levy an early repayment charge if you end your agreement early but it is possible to get an Equity Release plan without these charges, but not all providers offer this option.
Q: Is There an Alternative to Equity Release?
A: There are several alternatives to equity release, including downsizing, moving to a less expensive neighbourhood, or by asking your relatives or friends for help.
Q: How Long Does Equity Release Take?
A: Requesting for an equity release can usually take somewhere between 4 to 6 week for a lifetime plan and about 6 to 8 week for the home reversion plan, assuming the title is clear.
Q: Do You Have to Settle Annuity on Equity Release?
A: Unlike for lifetime, a home reversion plan is not a mortgage. Instead, the equity release organisation benefits from their share when it is sold after your death.
Q: How Do I Know If I Have Equity in My Residence?
A: To calculate it, and you can do so this way:
- Firstly, find out your home’s current market value.
- Then subtract your outstanding mortgage balance from the amount to find out how much equity is in your home.
Q: How Much is it to Release Equity from Your Residence?
A: This depends on various factors. It’s best to chat with an expert as each plan differs.
Q: What are the Criteria for Equity Release?
A: For you to qualify for equity release are, primarily:
- You have to be at least 55
- You have to own property valued at least £70,000
Q: Is Equity Release Worth Considering?
A: The most prevalent form of equity release is the lifetime plan, which enables you to access the nontaxed equity accumulated in your home. However, equity release doesn’t suit everyone. If you are an older proprietor looking to boost your finances relatively quickly without investing first, there are other options worth considering.
Equity Release Costs
Q: What’s the Average Interest Charged on Equity Release?
A: Equity release have “rolled up” fee, defined as, interest compounds and the overall pledge increase rapidly. For example, a proprietor unlocking £100,000 of equity from their £250,000 home at 2.65pc would have be charged £2,650 in the first year.
Q: How’s Interest Computed on Equity Release?
A: The lifetime ones are charged on set compound interest. It’s often computed daily but added on either every month or annually.
Q: Does Equity Release Require Credit Checks?
A: For most schemes repayments are not required, so many do not undertake any form of checks.
Q: Can You Settle a Lifetime Mortgage?
A: You aren’t required to settle your lifetime plan during your lifetime unless the last surviving owner moves out permanently. Alternatively, you may have a considerable lump sum available and want to settle your plan so that you can include your home in your will.
Q: Do I Need a Solicitor for Equity Release?
A: Home owners considering a ‘lifetime plan’ to free equity from their property in retirement will be needed to have a face-to-face discussion with a representative before taking it out, under rules from the Equity Release Council.
Q: Do Banks Offer Equity Release?
A: Most high street banks like TSB, Barclays, Natwest and Santander do not offer equity release products but the recent range of equity release plans give you the most diverse range of options and competitive offers this financial sector has ever seen.
Q: Can I Use an Equity Release Plan to Settle Mortgage?
A: If you have accumulated equity in your residence, but you still have a balance, you may do so.
Q: Do You Need Good Credit Score for Equity Release?
A: You may be able to qualify for a HELOC if you have a score of between 660 and 700. However, your provider will charge higher premium, and the equity release firm may demand that and other financial factors—like your overall arrears —are in extra great shape.
The principal aim of equity release is to enable you to convert some of the value built into your land, and as such, it’s possible to do this even when you have outstanding pledge on the residence. However, the terms would need to be on a lifetime basis, and not on arranged-term, as it previously was.
Equity Release or Lifetime Mortgage
Q: Can I Sell if I Have Lifetime Mortgage?
A: If you have a lifetime one, you borrow money against the value of your property and then reimburse this, plus annuity, at the end of the term. If you want to move, your lender should be able to transfer the arrears to your recently acquired abode.
Q: Can I Sell My House and Still Live In It?
A: Yes, you can. With a reversion, you can deal in all or fraction of your residence in return for a one, income every month, or both. Your abode, or the fraction of it you merchandise, now belongs to the reversion firm. However, you are permitted to carry on residing rent-uncharged in it until you breathe your last or move out permanently.
Q: How Much Interest do I Settle on Equity Release?
A: On top of the set-up fee, you also need to consider the usury stipulation. Rates are usually between 2.6% and 6% – and it can be fixed4 for the life of your pledge.
Q: What’s a Lifetime Mortgage?
A: A lifetime mortgage scheme is when you borrow money secured against your estate, provided it’s your principal residence, while still retaining 100% ownership. However, when you pass on or move into long-term care, the plan provider puts up your home up for sale, and the money from the sale is used to pay off the mortgage.
Q: What’s a Lifetime Loan?
A: Lifetime mortgages aren’t the only equity release products accessible. Just like the lifetime mortgage, the lifetime loan allows you to take out a mortgage that pays a cash lump sum that’s secured against the value of your property. You pay interest on the loan every month, and the amount you initially borrowed is recompensed when your lender eventually sells your property.
Q: What’s Equity Release?
A: Equity release is a way of retaining full ownership of a house or another object which has capital value, while also attaining a lump sum or a steady stream of income, using the value of the property. The “catch” though, is that you have to repay the plan-provider at a later stage, usually when you die or move out permanently.
Q: What’s the Difference between Equity Release & Lifetime Mortgages?
A: The essential difference between the two plans is, when you take out a lifetime mortgage scheme, you still retain ownership of your estate. However, with the home reversion plans, you sell a percentage of your property in exchange for a lump sum of cash or a lifetime of monthly income.
Q: How do Lifetime Mortgages Work?
A: A lifetime mortgage scheme is a way of unlocking a lump sum from the equity in your estate. The plans work by securing a loan against your residence. The mortgage and any interest you have to pay are reimbursed when your house is sold, so you don’t have to make any monthly repayments.
Q: Is Using Equity a Good Idea?
A: Generally, lines of credit also provide you with lower interest rates than equity loans, even though both are less than a credit card since your estate secures them. So, you can use the equity line of credit to assist with your continuing financial needs like education expenses or several home renovation projects that you’ve overextended over time.
Q: How Much Can I Borrow With a Lifetime Mortgage?
A: The percentage of your estate that you can borrow against depends on your age, and 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.
Q: How Does One Qualify for a Lifetime Mortgage Scheme?
A: With a lifetime mortgage plan, you take out a loan secured on your estate which doesn’t require to be repaid until you pass on or go into residential care. It frees up some of the wealth you have tied up in your property, and you can continue to reside there. Qualifying depends on your age, which is usually 55+ if you have an estate worth at least £70,000 in the UK, and your health conditions.
Q: Is Equity Release Like a Mortgage?
A: You could get a capital lump sum with an equity release mortgage that you pay back with interest when your lender sells your estate. The comparison also includes lifetime mortgages. Your estate may be repossessed, however, if you don’t keep up with the repayments on your mortgage.
Q: Can I Pay Back Equity Release?
A: You don’t have to pay rent to your equity release provider. For lifetime mortgages, you may be able to choose whether to pay back interest or let it build up. The lease is usually only paid back when you pass away or when your plan provider puts up your manor for sale.
Q: How Much Does Equity Release Cost?
A: Typically, this depends on your plan provider. If, however, the estate prices do recover, you’re more likely to have assets to pass on.
Q: Can You Repay a Lifetime Mortgage?
A: You aren’t obliged to repay your lifetime mortgage pan during your lifetime unless the last surviving homeowner moves into permanent care. Alternatively, you can have a lump sum available and may want to pay off your lifetime mortgage plan so that you can include your home in your will.
Q: What’s the Maximum Age for a Lifetime Mortgage?
A: Typically, there’s no maximum age for applying for a lifetime mortgage. However, most plan providers have set their age limits. When you take out the mortgage, most lenders usually set a maximum age of 65 to 80. However, when the mortgage term ends, it’s often a maximum age of 70 to 85.
Q: What’s a Lifetime Variable Mortgage?
A: A lifetime mortgage enables homeowners to turn equity that has built up in their estate into tax-free capital without having to sell their house or downsizing in an unfavourable market. A lifetime mortgage is built to last your lifetime, with interest rolling up over time.
Q: What’s a Lifetime Interest-Only Mortgage?
A: An Interest-only lifetime mortgage lets you make monthly interest payments. If you’re able to do this for the lifetime of your plan, there won’t be any unused balance to repay when it reaches its ends – only the amount first borrowed.
Q: Can Equity Release Pay Off Mortgage?
A: Yes, it can. According to most financial advisers, you must be able to pay off any existing mortgage or debt secured against your estate by completion – either with the proceeds of the lifetime mortgage plan or other savings you might have.
Equity Release Brands
Q: Does Halifax Do Lifetime Mortgages?
A: Yes, Halifax pulls the lifetime mortgage product. The withdrawal of this interest-only lifetime mortgage leaves Stone Haven as the only plan provider proving consumers with this form of a financial product. However, Stone Haven’s scheme is less attractive as it will only lend on an interest-only basis at lower loan-to-values.
Q: Does Halifax Do Interest-Only Mortgages?
A: Yes. With the lifetime mortgage industry growing at an alarming rate, Halifax has made it easier for its consumers to get an interest-only mortgage. Halifax will also allow you to say that you’ll sell your estate as a means of paying back the debt. However, you must have an income of more than £100,000 a year (£150,000 if you apply as a couple) and £200,000 equity in your residence.
Q: Does Halifax Offer Equity Release?
A: Yes, it does. However, the decision-making on the Halifax Home Retirement Mortgage Schemes is now dependent upon what Scottish Widows are providing as they currently administer Halifax’s equity release schemes.
Q: Does Santander Do Lifetime Mortgages?
A: L&G provides Santander customers with lifetime mortgage schemes. According to news, Legal & General decided to sign a five-year agreement to make available lifetime mortgages to Santander’s consumers. The service will also be accessible to existing Santander mortgage clients who are thinking about releasing equity from their houses to help fund their retirement.
Q: Does Santander Do Interest-Only Mortgages?
A: Yes, and according to sources, Santander said that they’d extend the maximum interest-only mortgage borrowing age from 65 to 70years from next Tuesday (7 February 2019). The new policy will apply to consumers who choose to have any part of their mortgage as interest-only.
Q: What’s the Maximum Age for a Santander Mortgage?
A: With the various changes occurring, the maximum age has extended from 75 to 85, and the maximum lending term increased from 25 years to 40 years for its buy-to-let products. It’s essential to note that the income-provider has extended its maximum mortgage term to 40 years, from 35 years, for residential capital and interest repayment deals.
Equity Release for Pensioners
Q: Is Re-Mortgaging a Good Idea?
A: Perhaps your current plan provider has denied lending you extra money or the terms it’s giving you aren’t worthwhile. Re-mortgaging to a new income-provider might allow you to raise cash cheaply on low rates. The most commonly tolerable reasons to raise capital are for home renovations and paying off other debts.
Q: Can You Move House with a Lifetime Mortgage?
A: If you have a lifetime mortgage plan, you borrow equity against the value of your manor and then repay this cash, plus interest, at the end of the deal. If you want to move home, your lender should be able to transfer the debt to the new estate.
Q: Can I Sell my House if I Have Equity Release?
A: Yes. The home reversion plan enables you to sell part or all of your estate to your preferred home reversion plan provider. In return, you’ll receive a lump sum5 or regular payments. You’ll generally get between 20% and 60% of the market value of your property (or the part you sell), whether or not you release equity in several payments or as a single lump sum.
Q: What’s a Retirement Mortgage?
A: The Retirement Mortgage is a lifetime mortgage plan, meaning that you don’t have to repay the amount you borrow until you pass on or move permanently into long term care. After that, you can opt to stop paying the interest, meaning it’ll be added to the mortgage instead.
Q: What’s a Retirement-Interest-Only Mortgage?
A: In response to the limited borrowing prospects for older homeowners, the financial services regulator – the Financial Conduct Authority (FCA) has now made its rules more comfortable, thus letting homeowners repay their loans to when the last proprietor passes away or goes into residential care.
Q: What’s a Flexible Lifetime Mortgage?
A: A lifetime mortgage is a form of equity release that enables clients (homeowners) to unlock some of the equity from their estate without having to move or downsize to a smaller house. There are typically no monthly payments with the flexible lifetime mortgage. Instead, the interest is added to the amount you owe every month.
Q: Can I Increase My Mortgage Term?
A: Extending your mortgage term can decrease your monthly payments or aid you in avoiding a probable foreclosure. Still, it would be best if you gave the decision to extend your mortgage loan some cautious thought. Perhaps you can manage your loan payments better if they are smaller once you lengthen your mortgage.
Q: What’s the Best Way to Release Equity from Your House?
A: Equity release is, in a nutshell, a way to release the value of your estate and convert it into a cash lump sum. You can unlock the cash through several modes (like the home reversion plan and the lifetime mortgage) which allow you to access – or ‘release’ – the equity (capital) tied up in your house if you’re 55+. Moreover, don’t need to have fully paid off your mortgage to do this.
Q: What’s an Enhanced Lifetime Mortgage?
A: Also known as ‘impaired’ lifetime mortgage scheme, the enhanced lifetime mortgages is an equity release scheme where the lending criteria depends on your health records.
Q: What’s a Lifetime Tracker Mortgage?
A: A Lifetime Tracker Mortgage is a form of variable rate mortgage. Tracker rates can be for an exploratory period (typically anything from one year to five years), or you can get a lifetime tracker, meaning you’ll be on it for the whole term of your loan.
Q: Are Lifetime Mortgages Regulated?
A: Yes. As per the federal law, the Financial Conduct Authority (FCA) regulates all home-owner mortgages. However, most buy-to-let mortgages aren’t. Lifetime mortgages, like the equity release plan that allows older borrowers to unlock cash, also have their own FCA rules.
Q: Why Equity Release is a Bad Idea?
A: Equity release is not always a bad idea. When used incorrectly it can be a terrible decision, however, it can also be one of the smartest decisions you’ll ever made if you are looking to unlock cash tied up in your estate, without worrying about repayments. Make sure you understand the pros & cons to see if it’s suitable for your circumstances.
Q: What Happens When My Fixed Term Mortgage Ends?
A: If you decided to go with the fixed-rate mortgage, your interest rate is locked in for a fixed period. In other words, the interest rate – and subsequently, your monthly mortgage repayment – will remain unchanged for an agreed period, but eventually, all good things come to an end.
Q: How Does 60 Lifetime Lease Work?
A: The Home for Life Plan is a lifetime lease for people aged 60 years old +. Using the scheme means you could pay up to 59% less than the estate market price to live securely in your new estate without rent, mortgage or any interest repayments for your lifetime.
Q: Can You Pay Off a Mortgage with a Home Equity Loan?
A: If you’ve built up equity in your property but still have a mortgage balance to pay off, you may want to use the home equity line of credit (HELOC) to decrease your regular payments and the overall interest you pay on your loan.
Q: Can I Use the Equity in My Residence to Buy Another Residence?
A: Yes, you can use your equity from one residence to purchase another property, and there are many perks to doing so. If you live in an unwavering dwelling and are interested in buying a rental residence, it may make sense to use the equity in your principal residence toward the down payments on an investment property.
Q: Is It Smart to Settle Your Estate?
A: According to most financial experts, paying off in advance actually comes with an expense to your bottom line. For investments to make more sense than settling a pledge prematurely, the annualised return periodically would only need to make more than the pledge oker.
Q: Is it a Nice Idea to Settle a Mortgage in advance?
A: By paying off in advance, you will be cutting back on the additional oker expense that you would incur in your remunerations. The accumulation can be significant and will grow with the prepayment amount. The lower your oker stipulation are, the less you stand to profit.
Q: How Can I Settle in 7 years?
- Comprehend how a mortgage functions. In most situations, your remunerations remain the same, but the balance you owe decreases
- Get excited to remunerate your lease. You have to be on a mission.
- Do the math
- Make it happen
Q: What Happens When a Mortgage Expires?
A: When your current lease term reaches its maturity date, you’ll have to renew the outstanding balance for another term. It’s a process you’ll likely do several times until you pay off your mortgage entirely. Just before your term expires, your current plan provider will send you a renewal offer in the mail.
Q: What Happens at the End of the Mortgage Term?
A: If you’re on a standard repayment mortgage plan, then it’s likely that you’ve paid off your secured loan at the end of your term that you agreed on in your contract at the beginning – unless you made over-payments, fell behind or extended your loan term. Once you reach the end of your interest-only mortgage term, your debt will still be outstanding.
Q: Can You Pay Off Mortgage at End Term?
A: It depends on the type of term you opt to take (open or closed). You’ll have to consider the prepayment charge should you choose to pay off your mortgage before the end of the mortgage term. Each of these choices may affect how rapidly you’ll be able to pay off your mortgage and how much interest you will have to pay.
Q: Can I Get a Mortgage if I’m Retired?
A: Financial planners and mortgage lenders say, yes. Under the Equal Credit Opportunity Act, plan providers can’t discriminate against borrowers based on age, which are usually retired borrowers. Like the working mortgagors, you need to show that they have good credit, not too much debt, and enough on-going income to recompense the mortgage.
Q: Can I Get a Mortgage at 55?
A: Age is just a number, or so the saying goes. However, it does matter if you’re applying for a home equity loan. If you’re aged 55 and above and need a mortgage or to re-mortgage into retirement, you may hassle to get the mortgage you want. Click here our guide to getting a mortgage if you’re over 50.
Q: Can a 60 Year Old get a 20 Year Mortgage?
A: Retirees every so often assume that they’re eligible to a 30-year mortgage. Legally, however, banks can only offer mortgages based on one’s financial qualifications alone. It means applicants can’t be turned away based on their age, whether they are 50, 60, or even 90 years old.
Q: Can You Get a Mortgage At 60?
A: For mortgages over 60 – You’ll only be able to apply for shorter mortgage terms and may need to prove that you have your pension and investment income. When it comes to mortgages for over 70 – It’ll be tough, but not impossible, to get a lease. However, if you are a proprietor, it may be possible to get a secured loan.
Q: Can I get Interest-Only Mortgage at 60?
A: Some mortgage plan providers insist that you pay off a retirement interest-only mortgage by the time you’re a particular age. It can be as low as 80 or as high as 99years. Moreover, the amount you can borrow with an equity release lifetime mortgage isn’t interconnected to your monthly income – only to the value of your residence and your age.
Q: Can I get An Interest-Only Mortgage at 65?
A: With the mortgages from various equity release companies, that are mostly aimed at borrowers aged 55 to 85 (when you’re applying), repayments can be extended up to the age of 99. In both cases, the highest amount you can borrow is 60% of the value of your estate if you go for interest-only but 75% with the repayment mortgage scheme.
Q: Can I Extend My Interest-Only Mortgage Term?
A: It’s possible to ask your plan provider to lengthen your term to offer you more time to save for the lump sum. It could give you the chance to switch at least some or the entire loan to a repayment mortgage, as by extending the term, your monthly repayments will be lower and more reasonably priced.
Q: Do Banks Still Do Interest-Only Mortgages?
A: Supposing you make all your payments, you’re guaranteed to pay off the whole loan amount at the end of the term. With an interest-only mortgage plan, you only pay the interest on the lease. At the end of the mortgage term, you’ll still be obligated to pay the initial amount you borrowed.
Q: How Do I Build Equity in My Residence?
A: There are seven steps to build equity and some of these include, but are not limited to:
- It would be great if you made a big down-payment
- Your equity represents how much of your dwelling you own so focus on paying off your pledge
- Remunerate more than you need to
- Refinance to a shorter term
- Renovate the interior of your habitation
- Wait for the value to rise
- Add curb appeal
Q: What is Considered an Excellent Equity?
A: It is the market value of a proprietor’s unencumbered ownership in their actual property, that is, the difference between the fair value and the outstanding balance of all liens. In economics, however, it is known as the real property value.
Q: Can I Put My Mortgage On Interest-Only?
A: The government and financial institutions are now restricting how much of your mortgage you can pay interest only. Plan providers are only allowing you to pay up to 90% of your mortgage interest only, which means if you took out a 110% LTV mortgage when the market was booming, you’d still have to pay the capital on the balance of your mortgage.
Q: Are Interest-Only Mortgages a Good Idea?
A: Interest-only mortgages don’t often suit most borrowers. Therefore, make sure you only get one if you’re aware of the risks and have a repayment plan to save enough capital by the end of the term. You’d need to be able to make a profit from your investment vehicle and preferably have a backup plan to aid you in paying off the loan.
Q: Should I Pay Off My Interest-Only Mortgage?
A: With an interest-only mortgage, you pay off the interest on a lease, but not the money borrowed. It means that the monthly repayments are mostly a lot lower than those on repayment mortgages. As a result, at the end of the mortgage term, you will need to find a way to pay back what you owe in a single lump sum.
Q: What are the Disadvantages of Interest-Only Mortgages?
A: Some of the drawbacks to Interest Only Loans include:
- The rising mortgage rates increase risk if it’s an ARM
- Many people tend to spend the extra money extravagantly instead of investing it
- Most people can’t afford principal payments when the time arrives, and many aren’t disciplined enough to pay extra toward the principal
- The income may not grow as rapidly as you planned
Q: How Much Can I Borrow on an Interest-only Mortgage?
A: The maximum loan for interest-only mortgages offered by most lenders has gone up from 50% to 60% Loan to Value (LTV). It means that you can borrow up to 60% of the value of your residence on an interest-only basis. You can also pay back up to 60% of the mortgage on an interest-only basis.
Q: Can I Overpay an Interest-Only Mortgage?
A: if you make overpayments, your plan provider should apply these to your outstanding debt, and cut your regular interest payments from the next calculation date. If your over-payment significantly dents the debt, it may make moving onto a repayment mortgage a reasonable decision.
Q: Can You Re-Mortgage at the End of an Interest-Only Mortgage?
A: As per the federal law, your mortgage contract will say you have to repay the full amount at the end. So if you have an interest-only re-mortgage, you can’t rely on your income-provider coming up with many options for you at the end, let alone a great one like allowing you carry on with making your current monthly mortgage payments.
Q: Is Interest-only Mortgage Better than the Repayment Option?
A: It’s more expensive than the repayment plan. With a repayment mortgage every year, the amount of interest you owe decreases as you’re paying it on a smaller and smaller loan. However, with an interest-only mortgage, the money owed doesn’t shrink, so you keep on paying interest on the full amount.
Q: Does the Interest-Only Mortgage Affect Credit Rating?
A: No. Switching your mortgage plan to interest-only won’t affect your credit file any differently than the repayment option – if you’re late, it’ll have a negative effect. If you’re early, it’ll have a positive one. The monthly payments will be less on interest-only – but overall, you will pay more.
Q: Can You Borrow Equity against Your Home with Bad Credit?
A: Yes. You can actually get a home equity loan or HELOC — also known as a second mortgage — even with bad credit. That’s because you’re using your property to guarantee the loan. It’s practically a balancing act between your credit score and your DTI. So if you have a high DTI, it can assist you to have a higher credit score.
Q: Will Mortgage Rates Go Up in 2020?
A: According to most industry analysts, financial companies expect the average rate for 30-year fixed mortgages to hit 2.5% in 2020. Presently, it’s around 2.7%. The 10-year Treasury yield — which mortgage rates tend to follow — could surge close to 2.7% before dropping back down to 2.05% by the end of 2020.
Q: Will Interest Rates Go Up in 2020?
A: Most equity release companies are still betting that interest rates will remain on hold at 2.75% for the rest of 2020 and upsurge only once, by a quarter of a point, over the next three years.
Q: Is It Worth Fixing Mortgage for 10 Years?
A: Your monthly payments will be higher, at least at the beginning. Your interest rates will be higher on a 10-year fix than when you have a shorter-term deal, pushing up your monthly repayments: the lowest mortgage rate for a 10-year-fix (60% LTV) is 2.49%, while for a 2-year-fix (60% LTV) it’s 1.35%.
Q: Can You Still Get Interest Free Mortgages?
A: By having an interest-only mortgage, your monthly payments pay only the interest charges on your mortgage, not any of the initial amounts borrowed. It means your payments will be less than on a repayment mortgage, but at the end of the loan term, you’ll still owe the initial amount you borrowed from your provider.
Q: Can I Sell My House without Equity?
A: Yes. However, selling your home can be a drawn-out and overly complicated matter. The process can become even more challenging if you owe more on your mortgage than the price your estate is currently valued at. Equity in property is one of the most significant benefits you can have as a proprietor during the process of selling your house. There are five ways you can sell your home without equity:
- You can sell through a realtor
- The short sale or compromise sale
- Put it up for sale on your own without asking for assistance from a realtor
- You can sell to an investor
- There are also companies on the national level that buy homes without equity
Q: Can I Re-Mortgage My House If I Own It?
A: Yes, you can, re-mortgage. You may think your situations are unusual, but, whatever your circumstances, lenders will usually consider an application. So, if you don’t have an outstanding mortgage, and you own 100% of the equity in your property, your chances of re-mortgaging are high. The mortgage deals presented to you will depend on how much you want to borrow as a percentage of the current value of your estate, which is known as the loan to value ratio (LTV)
Q: Can You Have Two Primary Residences?
A: The short answer to this is that you can’t have two principal residences. You’ll need to figure out which of your houses will be considered your principal residence and file your taxes accordingly. However, while you may not be able to claim multiple primary homes for tax purposes, the IRS does offer you tax deductions if you own several homes.
Q: How Much Deposit Do I Need for a 2nd House?
A: Most second home mortgages need at least a 25% deposit, and you may require even more than that if your present income doesn’t cover both mortgages at the same time. In addition to this, your income will be even more significant in the application for a second home mortgage.
Q: Can I Re-Mortgage with a Poor Credit Score?
A: The simple answer to this question is yes. However, if you have more than a minor issue with your credit score, then you’re unlikely to get a re-mortgage on the high street.
The maximum percentage of equity you can release from the capital tied up in your property is usually 60%. However, the amount of money you can release is typically dependent on your age, medical history, and your estate’s market value (it has to be valued at more than £70,000)
Learn More: What Is Equity Release
Equity release plans are fantastic. You get the financial freedom you need, and you can spend the cash you release to do whatsoever you’ve always wanted to do. You also don’t have to make any monthly repayments since you repay the loan when you die or move into permanent care.
Nonetheless, if you want to leave an inheritance, it might not be the best option for you. If you’ve looked at other alternatives and still feel that it’s your best choice, then you must consider ring-fencing some of the value of your estate.
Learn More: Equity Release FAQ’s
Yes, you can. However, you must ensure that the new estate meets the set requirements by your plan provider. Typically, equity release companies don’t lend on retirement homes. However, they might inflict additional restrictions on the type of house you can move to, as well as how the estate was constructed.
Learn More: How Does It Work?
How long your application will take depends on the plan provider and the type of plan you choose. Lifetime mortgages usually take about four to six weeks. In comparison, home reversion plans take six to eight weeks, provided that the title on the estate’s clear.
Learn More: Equity Release FAQ’s
We all deserve a break and with retirement comes free time. So, who says you can’t just relax, travel, work on your various duties and enjoy your golden years hassle-free?
Well, equity release is one of the best financial decisions you will ever make in a bid to enjoy the pleasures and wonders of life. Nevertheless, it can also be quite challenging to understand its form. Thus, if you didn’t find the answers you were searching for, don’t worry. You can click here for more information on how much equity you can release and chat with an expert for free.
Equity release is one of the best financial decisions you can make to maintain your lifestyle after retirement. However, it can also be quite challenging to understand its form. So, if you did not find the answers you’re searching for, do not worry. You can click here for more information on how much equity you can release and chat with an expert for free.
How much money could you release?
An equity release allows you to access the value of your home, tax-free without having to sell up, so that you can have money to spend on whatever you want or need.