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Releasing the equity in your home is a big decision and there’s no ‘one size fits all’ solution. Choosing the best plan depends on a number of factors:
- How much your home is worth & the equity available
- The age of you and your partner
- Whether you wish to maintain ownership
- How much inheritance you want to leave
This is why our Independent Advisors take so much time really getting to know you, your individual circumstances and what you are looking to achieve, before assessing a wide range of providers to find the very best plan for you.
Equity Release options in a nutshell
Whilst tailored advice is essential it’s nice to have an understanding of your options before taking the next step.
A Lifetime Mortgage (Equity Release Mortgage)
This popular form of Equity Release allows you to release tax-free cash from your home without having to sell, give up ownership or move. The money is then yours to splash out on whatever you fancy!
What is a Lifetime Mortgage?
A Lifetime Mortgage is a loan that is secured against the value of your property and in this way it is similar to a standard Mortgage.
How is it different from a standard Mortgage?
However, unlike a standard Mortgage, you make no monthly repayments during your borrowing period. And, as the name suggests a Lifetime Mortgage is just that, it has no fixed term.
When is the loan repaid & what about interest?
Your loan is repaid from the future sale of your property. This generally happens when you die or, in the case of a couple, when the survivor dies or moves permanently into care. The interest is added to the loan and repaid when your property is sold or when a family member (beneficiary) pays off the loan with associated interests. You can choose to make interest or ad hoc payments and reduce the interest at the end of term.
So the loan increases over time?
Yes, however this increase is generally offset by any future rise in the value of your property and the ‘no negative equity’ guarantee means you’ll never owe more than the value of your home.
What if I already have a mortgage on my home?
That’s fine, some of the money you release will first pay off your outstanding mortgage and the rest is yours to spend as you wish.
Is a Lifetime Mortgage the same as a Home Reversion Plan?
No. With a Home Reversion Plan you sell your property to the lender in exchange for a cash lump sum. With a Lifetime Mortgage you still own your home and are simply borrowing against it.
Why choose a Lifetime Mortgage?
The fact that you still own your home is a big plus for many people. And, borrowing against your home in this way means you can enjoy tax-free cash without the burden of any monthly repayments. Why leave money sat in your home when it could be providing you with a first class retirement!
A Drawdown Lifetime Mortgage
Another popular form of equity release is a Drawdown Lifetime Mortgage. This gives you the flexibility to release cash from your home over time (rather than a single lump sum) without the need to downsize or give up ownership. As with other Equity Release plans, the cash you release is yours to spend as you wish.
What is a Drawdown Lifetime Mortgage?
A Drawdown Lifetime Mortgage is a loan that is secured against the value of your property and in this way it is similar to a standard Mortgage and a Lifetime Mortgage.
How is a Drawdown Lifetime Mortgage different to a Standard Mortgage?
Unlike a standard Mortgage, you make no monthly repayments during your borrowing period. And, as the name suggests a Lifetime Drawdown Mortgage is just that, it has no fixed term.
How is a Drawdown Lifetime Mortgage different to a Lifetime Mortgage?
With a Drawdown Lifetime mortgage you release smaller amounts of tax-free cash as and when you need them, rather than one big lump sum.
What’s the benefit of releasing money over time?
In short, you could end up paying less interest. Interest is only charged from the date you release each amount.
How do you work out how much I can borrow?
The full amount you are entitled to borrow depends on your age, the value of your home and the equity available. This amount is then pre-approved for you to draw on as and when you need to.
What if I later need to borrow more?
When you’ve accessed all your agreed funds you might be able to borrow more. This depends on the future value of your home, your current age and how much you’ve already borrowed.
When is the loan repaid & what about interest?
Your loan is repaid from the future sale of your property. This generally happens when you die or, in the case of a couple, when the survivor dies or moves permanently into care. You don’t have the burden of monthly payments and the interest is only added to the loan as you borrow each amount.
So the loan increases over time?
Yes, however this is generally offset by any future increase in the value of your property and, because you haven’t accessed all the money right from the start, the associated interest is generally lower.
What if I already have a Mortgage?
That’s fine, some of the money you release will first pay off your outstanding mortgage and the rest is yours to spend on whatever you fancy.
Why choose a Drawdown Lifetime Mortgage?
With a Drawdown Lifetime Mortgage you still own your own home whilst enjoying tax-free cash to spend as you wish, all without the burden of monthly repayments. And, by staggering the amounts you release you are only charged interest from the date of each withdrawal, so the interest added at the end is reduced and you are more likely to able to extend your borrowing. Just think what you could do with all that money currently sat in your home.
A Home Reversion Plan
Providing an alternative to a Lifetime Mortgage, Drawdown Lifetime Mortgage and Interest only Mortgage, a Home Reversion Plan offers tax-free cash in return for selling all or part of your home.
What is a Home Reversion Plan?
With a Home Reversion Plan, your provider purchases all or part of your home, giving you a tax-free cash lump sum.
How is a Home Reversion Plan different from a standard or Lifetime Mortgage?
Quite simply, Home Reversion Plans are not loans or mortgages and therefore no interest is added. You are not borrowing against your home, you are selling all or a percentage of it to the provider.
Could I lose my home?
No, your provider guarantees you a lifetime lease so that you can live in your home, rent-free, until you die or go into long-term care (or when the longest surviving partner dies or moves permanently into care).
Who gets the money when my home is sold?
If you sell all of your property to release funds when the home is sold the entire value goes to the provider. If however you sold 50% of your home when the property is sold 50% of the value goes to the provider and 50% to your family or stated beneficiaries.
How do you work out how much money I can receive?
How much you receive for your share depends on the value of your home and how old you are. The younger you are the longer you are likely to be living rent-free in your property, so the amount offered by the provider will be less.
Can I buy back my share?
No, a Home Reversion Plan is a long-term commitment, under which you will not be able to buy back all or part of your property.
What if I want to move house?
All Equity Release Council approved Home Reversion Plans allow you to move home, providing that the new property is suitable to the provider.
Can I choose to sell more of my home at a later date?
If you have not sold you entire home you might be able sell further shares, as and when you wish to release more money. Some providers will even guarantee to offer this option should you need it in the future.
Why choose a Home Reversion Plan?
Customers often choose a Home Reversion Plan because of the higher amount it allows them to release and the certainty they provide; there’s no added interest and you can decide what percentage of your homes value you leave as inheritance. Some customers want to release the maximum amount of money from their home to pay off a large mortgage or to fund a more comfortable retirement.
Access tailored advice – 0800 612 6755
Deciding on the best Equity Release Plan for you is detailed and complex and everyone has a different set of circumstances. If you would like free no-obligation advice from one of our Equity Release Specialists please get in touch with our friendly team.