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  • Writer's picturePhil Henden

Equity Release/Lifetime Mortgage

Updated: 6 days ago

If you are heading into retirement with a pension shortfall or you have any unexpected expenses that require funds there are options such as Equity release or lifetime mortgages available.

Utilising the equity remaining in your property is one option to look at but is a big decision that should not be taken lightly. Advice should be sought from a Financial broker to understand this option fully.

 

What is Equity Release?

This is a range of products that let you borrow money as a loan secured against your home. The loan, plus interest, doesn’t have to be paid until the last borrower dies or moves out of the home into long-term care. There are two main types of equity release: lifetime mortgages, which allow you to borrow money against your home; and home reversion, where you sell a share in your house to the lender.

Lifetime Mortgage:

With a lifetime mortgage, you borrow a proportion of your home’s value. Interest is charged on the amount, but nothing has to be paid back until you die or sell your home. The interest is compounded or ‘rolled up’ over the period of the loan.

Home reversion Schemes:

With a home reversion scheme, you sell a share of your property to the provider for less than the market value. You have the right to stay in your home for the rest of your life. When you die or move into long-term care and the property is sold, the provider gets the same share of whatever your home sells for as repayment. You can take out some lifetime mortgages from the age of 55, but home reversions are only available to people aged 65 or older.

What happens when you die?

A lifetime mortgage must be repaid when the last borrower on the loan dies or moves out of the home and into long-term care, using the proceeds from the sale of your home. The sale must take place when the last named person on the lifetime mortgage dies. There’s a 12 month period for your estate to make the sale and repay the mortgage, any money that is left after the repayment, or where there is Inheritance Protection, will be kept by your estate.

Legal and General have a really useful equity release calculator which gives an indication of what you can release: https://www.legalandgeneral.com/retirement/equity-release-calculator/

Next step… Taking out an Equity release product is a big decision and you should always discuss this with an adviser first. Contact us at Henden Financial to discuss if this is the right option for you. www.hendenfinancial.co.uk, phil@hendenfinancial.co.uk, 07787 288820.

Equity release includes Lifetime Mortgages and Home Reversion Schemes. We can advise and arrange Lifetime Mortgages and will refer to an approved specialist for Home Reversion schemes.

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