In This Article
What is equity release?
Equity release is a loan that allows people over the age of 55 to raise cash from the value of their property without having to sell it.
The money you receive can be spent in many ways, such as paying off debts, funding a new business, or funding your retirement although different lenders may have different criteria around use of funds.
You can receive a lump sum or small amounts over time, with interest being paid on the amount borrowed. Equity release can also be used to purchase a property.
This loan has been designed so that it’s tax-free, but it may affect what benefits you qualify for if you end up with a large amount of savings.
A good resource for seeing how equity release would affect benefits is Entitledto.
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Benefits of equity release?
Equity release can be used for a variety of purposes, including funding retirement, paying for home improvements, or paying off a mortgage.
Equity release can provide a source of extra income, which can be used to improve your quality of life in retirement. Also equity release may reduce inheritance tax against your estate as there would be less equity within the property.
Here is an inheritance tax calculator from HMRC, but as this subject is complex, taking professional tax advice would be prudent.
How does equity release work?
With an equity release product, you can access money that is tied up in your property. This can be a way of supplementing your income in retirement, for example, by covering the cost of unforeseen expenses or home improvements. There are two types of equity release products:
Lifetime mortgage
A lifetime mortgage is a type of equity release where you borrow against your home and don’t have to pay it back until you move into long-term care or die. The amount you can borrow depends on the value of your home and how much equity you have in it.
With a lifetime mortgage, you can stay in your home for as long as you want and don’t have to worry about making repayments, which can be helpful if you’re on an income that does not pay enough to support the repayments.
This may work if equity within your property is not your priority as it is important to be aware of an increasing loan balance if payments are not being made.
Interest only lifetime mortgages
An Interest Only Lifetime Mortgage is a type of mortgage in which you get a lump sum of money and continue to own your home. With this type of mortgage, you make monthly repayments, so the loan does not increase.
You may also have the option to pay off larger chunks subject to the lender’s rules and penalties. Your adviser will be able to clarify what you can and cannot do with each product.
Drawdown lifetime Mortgages
A drawdown lifetime mortgage is a type of loan that allows homeowners to release money gradually over a period of time, as opposed to in one lump sum.
This type of loan may offer more flexibility than a lump sum lifetime mortgage and can be a good option for those who want to keep their home and do not need all of their money in one lump sum.
Home reversion plans
If you are over the age of 65, and you’re looking for a way to get some extra cash out of your home, a home reversion plan may be an option.
With a home reversion plan, you give up ownership of all or part of your property in exchange for a lump sum of money or a series of payments. In return, the home reversion provider offers you a lifetime tenancy, which allows you to reside in your home rent-free for the rest of your life.
This type of scheme is not to be taken lightly and the need for professional advice cannot be stressed enough. Read more: Mortgages For Over 50s.
Do I qualify for equity release?
If you are over the age of 55 and own your home, you may be able to use equity release to borrow money. This money can be used for things like paying off debts, financing a project, or making a purchase. You can even use it for everyday expenses if you need extra cash.
To see if you qualify for equity release in Lancashire, you must first be over 55 years old and own your home. If you meet both of these requirements, you can then figure out how much money you want to borrow. Equity release loans usually range from £10,000 to £100,000 or more. Knowing how much money you need will help you decide what size loan is best for you.
How much can I get?
If you are looking to unlock the equity in your home, it is important to know how much you will be able to borrow. This will be influenced by your age, circumstances, home, and the amount of equity you are looking to raise. An equity release adviser will be able to guide you here.
Your individual circumstances
Your age and the value of your property are big factors in the maximum amount you can borrow. Also, your health and lifestyle could enable you to borrow more.
To find out what equity release solutions may be available to you and whether they would be suitable for your individual circumstances, speak with a qualified equity release mortgage adviser.
Make sure the firm that you get advice from are regulated by the Financial Conduct Authority and logged on the FCA register.
Your home
The amount of equity release you can obtain will be reduced if you still have a mortgage left to pay as that would be redeemed before funds are distributed to you. Additionally, the type of property you own, and its present condition may be a factor.
Other alternatives to equity release
Equity release is not for everyone. However, if you feel that it could be the right solution for you, it is important that you research the benefits and drawbacks of equity release, alongside the alternatives available.
One alternative to equity release In Lancashire could be downsizing to a smaller, lower-valued property in order to release some funds. This may mean moving to a new location other than Lancashire.
Some questions to ask yourself before downsizing are:
- Would you want to move out of your family home?
- Would you be too far away from friends and family?
- Could you get by in a smaller home?
Although downsizing could be an option for you, there are many fees and taxes that you should consider if doing this, including estate agent fees on the sale, legal fees, moving costs, and stamp duty for the new property being purchased if you plan to own your home again.
Some people rent out rooms through websites such as SpareRoom taking advantage of the Government Rent A Room Scheme.
It may be that you still qualify for a normal mortgage and don’t need equity release.
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Can you establish a budget that works better for you?
If you’re having trouble making ends meet, see if there are any areas where you can cut back on spending. Could you switch to a cheaper phone plan or get a roommate to help with rent? The government’s “Rent a Room Scheme” lets homeowners earn extra cash by renting out a spare room but remember that there are certain responsibilities that come along with this. Make sure you’re prepared to handle them before taking the plunge. Also, living with a stranger may not be something you wish to do so please think carefully about this.
The benefits of taking equity release
There are many benefits to taking equity release In Lancashire, including not having to make any repayments in most cases, the mortgage being paid off when you move into long-term care or pass away, being able to access a tax-free lump sum, continuing to live in and own your home, and most products coming with a no-negative equity guarantee.
You can also choose to make a monthly repayment of interest if you wish with some products, which can help with budgeting, and many interest rates are fixed for life.
In addition to refinancing, you can also use lifetime mortgages to purchase properties with. You may do this if you have seen a property in Lancashire that looks perfect but you do not quite have enough in the way of funds to make the purchase.
If you are looking for a property to buy in Lancashire, great places to search are Rightmove, Zoopla and On The Market.
What is the downside to equity release?
One downside to equity release is that you may not receive the full market value for your home if you sell all or part of it. With a home reversion scheme, you are paid a percentage of your equity based on the current market value. If you have a lot of equity, you may not receive as much money as if you sold your home by another method.
With a lifetime mortgage, the loan may roll up and increase over time, eating away at your equity.
Always take professional advice when considering one of the products.
Can I sell my house if I have equity release?
Yes, you can sell your house if you have equity release but beware of the possible penalties for selling the property and clearing the mortgage. These need to be taken into account when drawing up an equity release product mortgage in the first place.
Many lenders allow you to sell the property and take the mortgage across to another suitable property but get advice from a professional adviser on this subject before taking any action.
Do you pay monthly for equity release?
With an equity release mortgage, you have the option to make monthly repayments on some products, but it is not required. If you choose not to make monthly repayments, the interest on your loan will be added to the balance of your loan, and you will be required to repay the loan when the property is sold. Read more: Mortgages Into Retirement.
Could I rent out my house with an equity release mortgage?
You may be able to rent out your house with an equity release mortgage, although most products of this type are not designed for buy-to-let purposes so please let your adviser know of your plans when taking an equity release product.
Do I need a solicitor for equity release?
You will need a solicitor to apply for equity release. The lender will often require that the law firm used for the equity release application has at least three or four partners, but this can vary. This means that your usual local solicitor might not be acceptable. The solicitor must also be on the lender’s panel to be able to act.
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Why release equity in Lancashire?
Lancashire is a beautiful county with many wonderful things to offer. With its rich history and culture, as well as its close proximity to Manchester, Liverpool and Merseyside, Lancashire is an ideal location for anyone who wants to live in the north of England.
The market in Lancashire has been steadily growing over the last few years, and there are many reasons why you should consider equity release In Lancashire.
If you’re thinking about releasing some of your equity, it’s important to make sure that you’re making the right decision. An independent mortgage adviser can help you decide whether equity release is right for you.
They will ask questions about your financial position and advise on how much money would be released from your property should you proceed with an equity release plan. They will also ensure that all costs are clearly explained, and any additional charges are explained prior to any decision being made.
If you would like I NEED ADVICE to put you in touch with a qualified equity release adviser, who can help you with equity release In Lancashire. Please complete the contact box.
Here is a more comprehensive guide to equity release and also learn about the Equity Release Council who set many of the equity release standards.
They are experienced, which can boost your chances of being approved.
