Equity Release – Is releasing cash from your home right for you?

Equity release is a way of unlocking the value of your property and turning it into cash, without having to move out or sell your home. A lifetime mortgage is the most common form of equity release, which is a loan secured against your home that you don’t have to repay until you die or enter long-term care.

What is a lifetime mortgage and how does it work?

A lifetime mortgage allows you to borrow a percentage of the value of your home, either as a lump sum or in smaller amounts over time. You can choose to pay interest on the loan, or let it roll up and compound over time. The loan and the interest are repaid from the sale of your home when you pass away or move into long-term care.

Who should consider a lifetime mortgage?

If you’re approaching retirement or already retired and are thinking about how to make the most of your finances, a lifetime mortgage could give your plans a well-earned boost. 

There are lots of reasons why people choose to release equity from their home with a lifetime mortgage. Perhaps you’re looking to pay off an existing mortgage on another property. You might be drawing up plans for a new kitchen or bathroom, or perhaps there’s a family member who needs a little help getting onto the property ladder themselves. Having access to some of the value of your own home could make a real difference in later life.

What can you use a lifetime mortgage for?

You can use a lifetime mortgage for any purpose, such as:

– Boosting your retirement income

– Paying off debts or an existing mortgage

– Helping your family with a deposit or education costs

– Making home improvements or adaptations

– Funding care or medical expenses

– Enjoying a better quality of life in later years

Is a lifetime mortgage right for you?

A lifetime mortgage is a long-term commitment that can have a significant impact on your finances and lifestyle. Before you decide to take out a lifetime mortgage, you should:

– Seek financial advice from a qualified equity release adviser who can explain all the risks and benefits of different products and providers

– Seek independent legal advice from a solicitor who can ensure that you understand the terms and conditions of your contract

– Talk to your family and anyone else who might be affected by your decision, such as beneficiaries or co-owners of your property

– Compare different lifetime mortgage products and providers to find the best deal for your needs and circumstances

– Consider alternative ways of raising cash, such as downsizing, using savings or investments, or borrowing from family or friends

What are the pros and cons of a lifetime mortgage?

A lifetime mortgage can be a useful way of accessing cash from your home, but it’s not suitable for everyone. Here are some of the advantages and disadvantages to consider:

Pros:

– You can stay in your home for as long as you live or until you need long-term care

– You can release tax-free cash from your property

– You can choose to make repayments or not, depending on your circumstances

– You can benefit from any increase in the value of your home

– 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).

– 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).

Cons:

– A lifetime mortgage will reduce the value of your estate and the amount you can leave as an inheritance

– A lifetime mortgage may affect your eligibility for means-tested benefits and grants

– A lifetime mortgage will increase the amount of debt you owe over time, as interest is added to the loan

– A lifetime mortgage may have higher interest rates and fees than other types of borrowing

– A lifetime mortgage may limit your options to move or downsize in the future

In addition to the Lifetime mortgages available there is also another option if you are in a position to make monthly payments of interest. There are now some lenders that offer Retirement Interest only mortgages. Thses should be considered as part of a review of your needs and preferences in reaching any decision to release equity from your home.

If you are interested in finding out more about equity release and lifetime mortgages, please contact us today for a free consultation with our expert adviser.

Professional Equity Release advice for Aberdeen and Aberdeenshire.

Equity Release Advice  

‘Equity Release’ includes home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration.