What is Equity Release?

Equity release enables people over the age of 55 to release tax free cash from the value of their home. The money can be withdrawn to suit your requirements & can be taken as a lump sum, or by flexible withdrawals, or as additional income to supplement retirement lifestyle. In fact, you have the freedom to spend the equity release tax free cash on anything you wish.

  • An equity release plan lets you unlock some of the value in your home and paying you a tax free lump sum.
  • You can release the equity in your home either in a lump sum or in small drawdown amounts.
  • Unlike other ordinary mortgages, Equity release plans usually pays for itself. You no more need to worry about paying your mortgage every month rather equity release providers get repaid once you sell your house, pass away or move into long term care.
  • People who are property rich but cash poor can release some of the cash from their home through an effective equity release plan.
  • You have the option of paying back the interest, or not, and the plan will run until the last person has died, or moved into long term care.
  • At that point the property is usually sold, with the proceeds of sale used to pay off the equity release scheme and the balance passes to any beneficiaries.
  • Equity release frees you from worrying about repaying your scheme and helps to retain 100% ownership of your home as long as you live.
  • You do not have to worry about living your home at old age and can stay there as long as you want.
  • Equity Release providers offer no age limit lifetime mortgages to elderly and retired people; however it means equity release loans can only be offered to those without an existing mortgage or outstanding mortgage payments having full ownership of their home.
  • You enjoy complete freedom of spending the cash as you wish.
  • There are a wide range of equity release plans available, which can be tailored to your individual circumstances and requirements.

Equity Release Types

Lifetime Mortgages:

Lifetime mortgages equity release schemes are targeted for over 55 people and unlike Home reversion scheme, you do not have to sell a part of your property to get cover. With Lifetime equity release you enjoy 100% ownership of your property and the freedom to live in your home as long as you want. Lifetime equity release schemes are repaid when the surviving person has died or gone in to long term care. Your beneficiaries will receive the net profit from the sale of the property and the life term mortgage repaid.

Enhanced lifetime mortgages:

Enhanced lifetime mortgage equity release schemes comes under Lifetime mortgages plans. If there has been an ill health or any health ailments then enhanced lifetime mortgages can be a very good option to choose. Under this scheme the lenders generally shorten the equity release term and often offer a larger lump sum than the standard rate.

Drawdown lifetime mortgages:

Drawdown lifetime mortgage are more flexible compared to other equity release schemes. Drawdown equity release schemes offer you control over how and when you wish to take your tax free cash. You will be provided with a cash reserve facility, from which you decide how much you wish to withdraw with the remaining cash reserved for a future date. Taking a lower initial release helps you to pay lesser interest over the long term and ensuring to keep more funds for your children. The biggest advantage of Drawdown lifetime mortgage is that you only need to pay interest on the money you withdraw and not on the amount of cash present in the reserve and the minimum amount you can drawdown can be as little as £2,000 with no further admin charges with having 100% ownership of your home.

Interest only lifetime mortgages:

The interest only lifetime mortgage is a form of equity release which comes with inheritance protection. The interest only lifetime mortgage can be a sensible retirement options for all those looking for an alternative to roll up equity release plans. All those above 55 years of age are eligible for this equity release schemes and as long as you are capable of paying the monthly interests, the mortgage balance will remain the same throughout the loan. As the interest rate is fixed for life it does gives you the assurance that monthly repayments will never change and paying back monthly interest to the lender maintains a level mortgage balance for the whole term.

Fixed Repayment Lifetime Mortgages:

The fixed repayment lifetime mortgage offers a predetermined fixed charge against the property. A fixed repayment lifetime mortgage offers the guarantee of knowing the percentage of the property that will be given up on finals sale. Fixed lifetime mortgages provide cash facility which can be drawn down either by a lump sum or regular fixed income without any need of monthly payments. The fixed lifetime mortgage is repaid upon death of the borrower or moving into long term care. Under the fixed repayment mortgage the lender offers an option of purchasing a lifetime annuity which guarantees an income for life and helps to cover care fees costs.

Home Reversion Equity Release:

Home reversion equity release plans involve selling a part or whole of the value in your property in exchange of cash. The tax free cash can be withdrawn as lump sum, income or a combination of both as a part of the equity plan. In return the equity release lender will offer you a lifetime tenancy agreement for the part they own. The main benefit that Home Reversion equity release schemes offers is that they guarantee a fixed inheritance to the beneficiaries.The minimum age for home reversion is 65 years and the more aged the applicants are the better the terms offered by the home reversion equity release providers.. However, some home reversion schemes do offer an early vacancy option which provides a guaranteed minimum payment if you die or leave the property in the first five years.

Home Income Plan Equity Release schemes:

Home income plans allow homeowners to release equity built up within their property. This release of equity, from either a lifetime mortgage or home reversion goes to purchasing an annuity which provides the income for life.The home income plan will pay out an annuity income dependent upon the size of the equity release, annuity rates, your age and gender. A home income plan annuity usually provides a greater income than a standalone annuity and the income provided by the lifetime annuity is guaranteed for the rest of your life.

Interest only mortgages:

The interest only mortgage proves to be a cheaper option than a capital and repayment mortgages. Use of an interest only mortgage can extend to purchasing a new home, or remortgage an existing property. Interest only mortgages plans are similar to interest only mortgage schemes; you borrow money from an equity release provider and payback the capital sum at a pre-determined point in the future.The main difference between the two schemes is the calculation basis of the amount that can be borrowed.

Capital and Repayment Mortgages :

Capital and repayment mortgages offer guaranteed debt repayment over a specific term. This type of residential mortgage works by the lender dividing the outstanding debt into capital repayments and interest payments. A capital and repayment mortgage provides security of repayment. As long as monthly payments are met, the mortgage will be repaid. This is achieved because in the earlier years you are paying mostly interest. One of the differences between capital & repayment and other mortgage options is that the balance reduces over the term of the mortgage. Unlike an interest only mortgage, these repayment schemes work on a capital & interest basis.

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