Equity Release (also known as a lifetime mortgage) is a way for homeowners aged 55 or over to borrow money against the value of their home without having to move out. You can take the money as a lump sum or as a series of lump sums, and you don’t have to make any repayments until you die or move permanently into long-term care.
A recent development is the ability to make interest only payments to stop the debt increasing while you have surplus income.
Try our new loan-to-value calculator
Who might equity release be suitable for?
Equity release can be a good option for people who:
- Are asset-rich but income-poor. If you have a lot of equity in your home but your income is low, equity release can be a way to access money to improve your lifestyle or pay for unexpected expenses.
- Are going through a divorce. If you are getting divorced and need to raise money to buy out your ex-partner's share of the house, equity release can be an option.
- Want to pass on wealth to their children. Equity release can be a way to release money from your home while you are still alive, so that you can give it to your children as a gift or help them with a deposit on a house.
- Those looking to make improvements to their home, including changes to allow them to remain in their home for longer as their mobility decreases.
- To repay a traditional interest only mortgage where there is no other repayment vehicle other that the sale of the property.
Note: There are myriad reasons to use Equity Release but these are some of the most common reasons clients give us.
How can an independent, whole of market broker help you secure the right equity release deal?
An independent, whole of market broker (we prefer the term adviser) can compare equity release products from a range of providers to find you the best deal for your needs. They will take into account your age, health, property value and other factors to recommend the right product for you.
Here are some of the ways an independent, whole of market broker can help you secure the right equity release deal:
- They will help you to understand the risks and benefits of equity release before you make a decision.
- They will explain the different types of equity release products available and help you to choose the one that is right for your needs.
- They will compare products from a range of providers to find you the best interest rate and terms.
- They will help you to apply for the equity release product and complete the paperwork.
- They will provide you with ongoing support throughout the equity release process and beyond.
- *As a regulated company, our advice is covered by the Financial Services Compensation Scheme.
Equity Release is not suitable for everyone and some clients may have other options but being authorised to conduct not just mortgage and insurance work but pensions and investments too, if there is a financial solution for you, we will be able to help.
What are the risks of equity release?
It is important to understand the risks of equity release before you make a decision. Some of the key risks include:
- You will have less equity in your home. The more money you release from your home, the less equity you will have. This could mean that you have less to pass on to your loved ones or that you may not be able to downsize in the future.
- The amount you owe could increase over time. Interest on equity release mortgages is typically compounded, which means that it is added to the loan balance each year. This means that the amount you owe could increase significantly over time.
- You may not be able to move home. Some equity release products have restrictions on moving home. This could mean that you have to stay in your current home even if it becomes too big or too small for you.*
- You could lose your home if you cannot afford to repay the loan. If you die or move permanently into long-term care, your estate will have to repay the loan plus interest. If your estate cannot afford to repay the loan, your home could be sold.
- *Though this is a possibility it is not one we have found to be an issue previously.
Isn’t equity release really dodgy? Don’t people get scammed and lose their homes?
Equity Release has been regulated for over 20 years now but there was a time when it wasn’t and anyone could present themselves as an Equity Release Adviser.
Many people still remember the horror stories in the press and some continue as the effects are still felt from policies mis-sold 25 years ago. Today its as regulated and protected as any other area of financial planning with the major lenders including household names like Royal London, Legal & General, Aviva and Standard Life.
Also, all produces sold with the Equity Release Council’s standards include a ‘No negative equity guarantee’ which gives borrows significant peace of mind; https://www.equityreleasecouncil.com/about/standards/.
Ensuring that something is left for loved ones when they pass is often a major consideration for clients but in reality, the level of borrowing and the rates at which funds are borrowed means that the chances of eroding absolutely all the equity in a property are very low.
Though Equity Release will not be right for everyone and is often considered a last resort, it can be a great solution that allows clients to remain in their own homes when there are little or no other options than selling a much loved home.
It can allow parents and grandparents to see their children or grandchildren get on the property ladder while they are still alive without reducing their income.
It can help cover the cost of living, the cost of care or the cost of a better standard of living in retirement.
If any of these scenarios feel familiar or spark some interest then please do get in touch and we can have an initial conversation about your situation and whether Equity Release could be right for you.