Is a Lifetime Mortgage right for you?

Lifetime Mortgages are one way of releasing equity that’s in your home while being able to continue living there. The principle is that you take out a loan that is secured on your home (a mortgage), that does not need to be repaid until you pass away or move into long-term care.

How does a lifetime mortgage work?

As outlined above, a lifetime mortgage involves borrowing money against the value of your home, that does not need to be paid back until your home is sold upon your moving into care or passing away. The property – and the responsibility for maintaining it – is still completely yours.

If you are considering a lifetime mortgage, it’s important to know that it’s possible to ring-fence a portion of the property’s value so that your family still has something to inherit. There is also a “no negative equity” guarantee, which means that, should the value of your home decrease over the course of the lifetime mortgage, your estate would not end up owing more than the final value of the property.

There are a couple of repayment options when looking at a lifetime mortgage: one where the interest rolls up into a sum that is payable at the end of your mortgage term, or interest-paying mortgages that require you to pay back the interest in regular or ad-hoc amounts. Typically, lenders that allow this set a 10% per annum level that is normally based on original loan and subsequent drawdown amounts. The second type usually ends up being more cost-effective overall, but the “best” one will depend entirely on your circumstances and preferences.

You can see more information on our equity release page.

Are there any restrictions?

Yes, a few. For starters, the majority of lifetime mortgages are designed for your primary residence, but their products are also available for buy-to-let properties and second homes. Plus, most lenders will have a minimum age you have to be before you can apply – usually somewhere between 55 and 60. Your age will affect how much you can borrow, too. For example, at 65 you can expect to borrow between 25% and 30% of your property’s value. As you get older, you can borrow as much as 50%.

You should be aware that lenders will have minimum loan amount, which can range between £10,000 and £45,000, and your home will have to have a certain value in order to be eligible (at least £70,000 but higher for some lenders).

Contact us

As with any big financial decision, entering an equity release scheme should not be rushed. Take the time to carefully consider your alternative options, discuss the idea with your family and seek professional advice. I have been an Independent Financial Advisor for many years and provide specialist, unbiased advice about the implications of equity release and the options available.

For more information about the service I provide, please get in touch. I would be happy to answer any questions you may have and arrange a free, no-obligation initial consultation at a time and place that is convenient for you.

Nationwide Economic Update September

Nationwide’s Chief Economist, Robert Gardner, shares his views on the outlook for the UK economy, housing and mortgage market and house prices, in this latest quarterly update video. You’ll learn about:

• Interest rates
• Brexit
• The mortgage market
• Impact of higher interest rates
• UK house prices
• Regional house prices

Get advice about your own property with John Whyte.
Highly experienced in the fields of mortgages and equity release, John Whyte understands the importance of talking to you in plain and simple English.

Get in touch today.

What’s the best Equity Release scheme?

“What’s the best equity release scheme?”

“Where can I get the best deal on a reverse mortgage?”

“Which provider will give me the best rates?”

As an Equity Release specialist, these are questions that I am asked very frequently (“reverse mortgage” being the American term for equity release, which can cause initial confusion)! The simple answer? There isn’t one.

Why? Equity release is a complex process and the results can vary depending on your home, your age, your current financial situation and how much cash you want to withdraw. Without careful consideration, any equity release scheme – or reverse mortgage – can be a fantastic opportunity or a financial disadvantage – which is why it’s so essential that you take on professional, impartial advice before signing up.

When is equity release a good idea?

Over the last decade or so, house values have increased at a staggering rate while incomes have struggled to keep pace. This means that a vast number of homeowners have more wealth tied up in their homes than in their savings account.

Once retirement hits, those relying on a state pension may find that their reduced income causes a significant drop in quality of life and that they can no longer afford the larger purchases they used to. Equity release provides an alternative source of funds, converting the wealth that’s locked up in your home into cash – without you having to leave it.

There are two main options with equity release; lifetime mortgages and home reversion plans. In either case, any money that you borrow will not need to be repaid until you move into long-term care and sell your home, or pass away. Both options also allow you to protect a certain portion of your property value so that it can be passed on through inheritance and, depending on the scheme you choose, you may be able to pay back interest or small amounts to limit the final repayment sum.

When might another option be more suitable?

Downsizing is a popular alternative to equity release, although it comes with the requirement of leaving your family home, which not everyone is prepared to do. Households that are currently receiving (or are planning on receiving) any means-tested state benefits may also find that equity release impacts their eligibility.

There may be many factors as to why certain equity release schemes will or won’t be suitable, which is why it’s essential to talk your decisions through with family members, close friends and – most importantly – an impartial financial advisor.

Contact me for more information

Although it might not be for everyone, the UK equity release market is growing by about a quarter each year. If you are considering the potential of equity release (or a ‘reverse mortgage’) to enjoy a more comfortable lifestyle in your later years, there is a wealth of different products and schemes available to suit all kinds of situations.

For more information, please contact me or email me on john.whyte@therightequityrelease.co.uk and we can take a look at your options. Initial consultations are always free of charge and without obligation, and you are welcome to visit our office in Worthing or I can arrange to meet you at your home.

Economic Update from Robert Gardner, Nationwide

Nationwide’s Chief Economist, Robert Gardner, shares his views on the outlook for the UK economy, housing and mortgage market and house prices, in this latest quarterly update video.

Get advice about your own property with John Whyte.

Highly experienced in the fields of mortgages and equity release, John Whyte understands the importance of talking to you in plain and simple English.

Get in touch today.

Is Your Home Fully Protected?

Your home is probably the most important thing you own but have you considered what would happen if the worst should happen?

Ensure your home is fully protected, get in touch with John Whyte today.

Why do people choose Equity Release?

According to the Equity Release Council, more people than ever are choosing equity release as a way of unlocking funds that are tied up in their home. Why are so many homeowners opting for this way of managing their finances? In this blog, we’re going to look at some of the main motivators.

1 – Paying off an existing mortgage

If you have owned your home for many years, the changes are that you’ve built up significant equity as its value has steadily increased. Releasing some of this equity as cash can allow you to pay off your remaining mortgage, so that you no longer have to make monthly repayments and can enjoy a more comfortable retirement income.

Unlike downsizing, choosing equity release means that you retain ownership of your home and won’t have to leave (unless you eventually decide to go into long term care).

2 – Funding large purchases or holidays

Sometimes equity release is used as a way of financing a well-earned splurge, like a new car or hobby equipment. Now that you don’t have to worry about the weekly 9-5, wouldn’t it be nice to do something fun with the extra time on your hands?

Maybe you want to treat your family to something special? A lump sum from equity release could be used to pay for a wedding or a or a trip of a lifetime with the immediate family. It’s your money, so you decide if, and how, you’d like to share it.

3 – Home improvements

Most homeowners could tell you things about their home that they’d like to improve, if only they had the time or money. A large number of people opt for equity release in their later years so that they can finally make those changes.

Considering that equity release guarantees that you can keep your home for as long as you like, it makes sense to invest in home or garden improvements so that you can live more comfortably. You may also want to alterations that boost your home’s value, so that you achieve more money if you do decide to downsize or move into a care home in the future.

4 – Boosting overall income

By the time most of us reach our senior years, we’ve got various investments and pots of money to draw from. However, it’s not always easy to plan these in advance, and pensions may not always yield as much as you had hoped. Equity release offers a tax-free lump sum or draw-down scheme to give you a little extra room in your monthly income post-retirement.

5 – Gifts and planning

Some people choose equity release as a way of passing on part of their home’s value to their children, to reduce the inheritance tax due on the property when they pass away. This could take the form of a cash gift, or by using the released funds to pay for house deposit or outstanding debts.

If you’d like more information about whether equity release is right for you, what your options are and how it might affect your finances, please get in contact. As an Independent Financial Advisor, I offer impartial and regulated advice and can help you come to an informed decision about how to release some of the equity in your home.

Four Questions to Ask Before You Downsize

Once the children have flown the nest or a larger home becomes too much to maintain, downsizing becomes a comfortable option for many people all over the UK. A common reason for this is to use the difference in property values to release money, often to assist with retirement funding or provide financial assistance to a family member.

However, downsizing isn’t always the best choice for some homeowners, especially with alternatives such as equity release available. Before you decide to sell your family home simply to release some of its value, consider these four questions.

1 – Are you ready to leave your home?

Moving somewhere new can often feel like a fresh start, but if you’ve lived in the same property for many years and raised your family there, leaving it behind can be difficult. Every room holds cherished memories, so it’s understandable that lots of people grow very attached to their homes.

If you’re sure that you’re ready for an exciting new chapter that’s great, but don’t feel forced to leave your property if you don’t want to. An equity release scheme would allow you to access some of the money tied up in your home without you having to leave it.

2 – Do you know where you would go?

Feeling happy about moving out is only half of the decision – you will also need to find somewhere that you would live next. This can be a big decision, particularly if you live alone. Relocating to a different part of the country may help you get more for your money, but you might miss the company and support of friends and family living nearby. Staying within a community will mean that if you have car problems or a health issue, you won’t feel stranded.

3 – Will downsizing actually balance the budget?

Depending on your current home and the type of property you’d like to move to, you may find that you are left with less capital than you had imagined. You should also factor in the costs of moving, like estate agents’ fees, conveyancing fees, the price of a survey, stamp duty and removals. Even once you’ve moved in, ongoing costs of living (like bills, management fees or ground rent) can all add up.

Have your home valued by an estate agent or surveyor and research the price of properties that you would be happy to move to, looking at their size, location and amenities. Compare the difference in house prices and the cost to work out whether a potentially-stressful move is worth it financially.

4 – When is small, too small?

You might be tempted to buy the smallest home you can find, focusing on how easy the housework will be and how little furniture you’ll need. This might be a disadvantage if you’re used to family and grandchildren coming to visit – never underestimate the value of a spare room! You will also need to get rid of a substantial amount of your belongings, which you might not be ready to do. By staying in your current property, you can hold onto all of your most treasured belongings and simply have a thorough de-clutter of all the items you don’t want.

If you decide that you’re not quite ready to move out of your home, an equity release scheme may be a good option to access some funds. Just like moving, equity release isn’t for everyone so if you want a free consultation to discuss your situation, please get in touch. You can find answers to commonly asked questions about how equity release works here.

What is the best way to release equity from your house?

Equity release allows homeowners to use the money they have invested in their home without having to move. Whether to cover a pension shortfall or to pay for a single, larger expense, using an equity release scheme is one way to make ends meet without having to leave your home.

There are two main types of equity release, with different benefits and drawbacks.

Lifetime mortgages

Lifetime mortgages involve borrowing a percentage of your home’s value, which gets paid back when you pass away or decide to sell your home. Most lifetime mortgages are offered with a fixed-rate interest that ‘rolls up’ over the duration of the loan. This means that debt can build quickly, although the Equity Release Council provides a guarantee that borrowers will never have to repay more than the value of their property.

Lifetime mortgage options include:

  • Lump-sum loans. You borrow a lump sum, for which the interest compounds each year until you go into long-term care or pass away.
  • Drawdowns. This option allows you to withdraw a smaller amount and draw down more money when you need it. Interest only accumulates on the money you’ve actually borrowed, which can make the overall cost lower.
  • Interest repayments. Some lenders will allow you to make interest repayments over the duration of the loan, which can go some way to reduce the final repayment.

There are drawbacks to having a lifetime mortgage, such as losing means-tested benefits. Costs can also escalate quickly, meaning that you may end up leaving little of your property’s value to loved ones after you pass. Most lenders have strict eligibility criteria (such as a minimum age, and minimum loan amounts) which may mean that a lifetime mortgage is not the best option for your circumstances.

Home reversion

Home reversion schemes involve selling a proportion of your home to the lender at lower than market value. You won’t need to leave your home, but when you pass away or move into care, the lender will get the same proportion of the property’s sale price.

Compared to a lifetime mortgage, it can be more difficult to estimate the cost of home reversion, as it ultimately depends on the sale price of your property.

Home reversion schemes will also have stringent eligibility criteria, with schemes only available to those who are 65 or older. Younger borrowers are often required to sell a higher portion of their home, too. For example, some plans will demand 70% of your home’s value for only 20% in advance.

Which equity release scheme is better?

Choosing the most favourable scheme depends entirely on your circumstances, and you should always consult with a regulated, independent advisor before making a decision. If you would like a free initial consultation about equity release options, please get in touch. As a specialist equity release advisor, I can explain each type of equity release and how it relates to your situation, helping you to choose a plan that allows you to comfortably enjoy your retirement.

Equity Release lending more popular than ever!

A quick look at the latest quarterly figures released by The Equity Release Council paints a convincing picture. Between July and September this year (Q3 2017), the over-55s withdrew £824 million of property wealth from their homes using equity release plans.

Compared to the same period last year (Q3 2016) when equity release lending totalled £572 million, this year’s figures represent a 44% increase year on year. In fact, it’s the highest amount for any single quarter since activity tracking began in 2002. The Equity Release Council is the industry body representing over 650 providers, financial advisers, solicitors and other industry professionals. It replaced the former Safe Home Income Plans (SHIP) in 2012.

New equity release plans up by 1/3

What’s more, the number of new equity release customers increased by just over 1/3 year on year for Quarter 3, with 9,905 new plans agreed. Another 6,849 existing customers used instalments to draw down funds, with an extra 1,138 obtaining further advances on their original plan. In total, the equity release sector saw activity from nearly 18,000 new or returning customers in Quarter 3 of this year.

Demand for drawdown products is rising

Around 3/4 of all new equity release products taken out were on a drawdown basis. Customers typically release smaller amounts of equity to start with, therefore reducing the build-up of interest over the duration of the plan. This also has the benefit of providing customers with the flexibility to unlock additional funds via future instalments as and when required.

The Chairman of the Equity Release Council, Nigel Waterson, said: “The combination of rigorous safeguards and flexible products in today’s market is one reason why housing wealth is now being used to support a wide range of financial goals. These range from boosting pension income and supporting retirement lifestyles to funding home improvements and adaptations, consolidating debts and providing a living inheritance to younger generations.”

If you’re a home owner wishing to release some of the equity tied up in your property, an experienced Mortgage and Equity Release Specialist, such as myself, can help you choose the right equity release plan. For further information or to arrange a free consultation, please get in touch.

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