In This Article
What is equity release?
Equity release is a mortgage that enables people over the age of 55 to tap into the equity in their home without having to sell it. The money borrowed can be used for a variety of purposes, such as paying off debts, funding a new business, or funding retirement.
Equity release loans typically come with lifetime fixed rates (although others are available), and the borrowed amount can be paid to you in a lump sum or in small instalments over time. One of the main benefits of equity release is that the loan is typically tax-free.
However, it’s important to note that taking out an equity release loan may affect eligibility for certain government benefits. For more information on how equity release might affect benefits, visit Entitledto.
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What are the benefits of equity release?
Equity release can be used to fund what you need for retirement, including holidays, home improvements, and mortgage repayments. With equity release, you can access the value of your home without having to sell it.
This means you can continue living in your home while still being able to live using the mortgage funds released from the value of your property.
Equity release can also be a more flexible and affordable way to borrow money in retirement than taking out a traditional mortgage due to not needing to make monthly repayments unlike a standard mortgage. This would however be added to the balance of the mortgage.
How does equity release work?
If you’re over the age of 55, you can release funds from the value of your home without having to downsize to another property. Equity release schemes work in two ways: Life time mortgages and Home reversion plans.
Lifetime mortgage
A lifetime mortgage is a type of equity release where you borrow a lump sum of money against your home and don’t have to make any repayments until you move into long-term care or pass away. The amount you receive depends on the value of your home and how much equity you have in it.
With some lifetime mortgage products, you can choose to make a monthly repayment of interest if you wish. This can help to keep the debt from compounding over time. Additionally, some later life products allow overpayments of, for example, 10% per year.
Lifetime mortgages can also be used for purchasing properties. For example, if you saw the perfect property in Sutton but did not have enough in cash / equity to finance the entire purchase, a lifetime mortgage may be the solution. Speaking with a professional adviser will give you a clearer idea on this.
If you are looking to but a property to spend your retirement in, Rightmove, Zoopla and On The Market are great websites to find them.
Interest only lifetime mortgage
An interest only lifetime mortgage is a type of lifetime mortgage where you can make monthly payments to pay the interest on the loan. With this type of mortgage, the capital will remain the same if the full amount of interest is paid each month.
Interest rates on lifetime many lifetime mortgage products are often fixed for life, so there’s no need to worry about increasing costs over time due to inflation or changes in interest rates. Some later life products are fixed for a shorter time though or variable so always ask for advice from your mortgage adviser about this.
Drawdown lifetime mortgage
A drawdown lifetime mortgage could be a good fit for you if you want to keep your home and do not need all of the money raised in one lump sum. With this type of loan, you continue to own your home after you release the funds, but you can do so gradually over time, as opposed to all at once.
This may be a solution for funding smaller purchases such as holidays and cars as the interest will only be charged on the amount drawn down rather than the full facility.
Home reversion plan
A home reversion plan may be an option for people over the age of 65 who are looking for extra cash. With a home reversion plan, you give up ownership of some or all of your property for a tax-free lump sum or series of payments.
In exchange for this payment or payments, the home reversion provider will offer you a lifetime tenancy, which allows you to reside in your home rent-free for the rest of your life.
Before taking out a home reversion plan, it is important to get professional advice to make sure that this is the right decision for you as you are giving up your home and this is not a decision to make lightly.
Do you qualify for Equity release Sutton?
To be eligible for equity release, you must be over the age of 55 and own your home. If you meet these criteria, you can use equity release to pay off debts, finance a project, or cover daily expenses and more depending on each later life lenders rules.
The amount of money you can borrow with equity release depends on the value of your home, but loans typically range from £10,000 to £250,000 but this can be much higher depending on the area.
Before applying for equity release, it’s important to figure out how much money you need so that you can choose the right loan size for your needs.
You should always seek professional advice when considering a lifetime mortgage. Your adviser should be regulated by the Financial Conduct Authority and registered on the FCA Register.
What is the maximum amount I can borrow if I want to unlock the equity in my home?
There are many factors that come into play regarding this, including your age, circumstances, your property, the type of loan you want to take, and the amount of equity you are hoping to raise.
For example, your age and the value of your property influences the maximum amount you can borrow. Also, your health and lifestyle can play a role, as some health conditions could enable you to borrow more.
Another factor to consider is your property itself. Is your home currently unencumbered? If you still have a mortgage, the maximum equity amount that you can apply for will be reduced by the amount of mortgage that you still have left to pay. Additionally, the type of property that you own and its present condition may also be factors.
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Alternatives to equity release in Sutton
Equity release is not for everyone, therefore it is important that homeowners research the benefits and the drawbacks of equity release, alongside the alternatives available.
Can you downsize?
You may have more space in your home if your children have grown up and moved out. One alternative could be to move to a smaller lower valued property to release some funds. Questions to ask yourself are:
• Does your current home require large amounts of maintenance?
• Is your home too expensive to maintain?
• Are you far away from friends and family?
• Do you feel lost in your large home?
Although downsizing could be an option for you, there are many fees and taxes that you must consider, including estate agent fees, legal fees, moving costs, and stamp duty for the new property being purchased.
Some people consider renting out a room taking advantage of the Rent A Room Scheme from the government.
SpareRoom may be a useful website for you to use when working out what rental income a room may attract.
It may be that you still qualify for a normal mortgage and don’t need equity release.
Can you budget more?
If you are struggling financially, can you consider applying a new budget to fit your lifestyle? Can you review your expenses and establish whether you can make savings or if you can change utility companies to get a better deal?
Can you let out a spare room?
The government’s Rent a Room Scheme allows homeowners to earn several thousand pounds tax-free. However, there are a number of responsibilities that you are obliged to meet, you should ensure you are aware fully of these responsibilities and before deciding to rent a room in your property.
You may also not want a stranger living in your home so the decision is not small. If you did want to explore this, SpareRoom is a good resource.
The benefits of taking equity release
There are several benefits to taking out equity release, such as not having to make any repayments, the mortgage being paid off when you move into long-term care, accessing a tax-free lump sum, and continuing to own your home.
Additionally, most regulated later life products come with a no-negative equity guarantee, and you can choose to make a monthly repayment of interest if you wish.
Downside to equity release in Sutton
One downside to home reversion products is that they may not pay you the full market value for your home. Instead, they may only pay you a percentage of the value, based on how much equity you have in the home.
This can be a problem if you have a lot of equity and want to sell your home, as you may not get as much money for it as you would if you sold it by another method.
Another downside to lifetime mortgages is that if the interest is not serviced, the loan will roll up over time eating away at your equity.
Can I sell my house if I have equity release?
You can sell your house if you have equity release, but you may have to pay penalties. Be sure to consider this when taking out equity release. You may be able to sell the property and take the mortgage with you to another property, but it’s best to get professional advice before making any decisions.
Do you have to pay monthly for equity release?
The answer is yes and no. With the most popular form of equity release, a lifetime mortgage, the loan balance rolls up with interest retained. However, some plans do allow for a standing order to be set up so interest can be paid and the loan balance remains the same. Your adviser would be able to recommend a suitable product based on your plans.
Could I rent out my house with an equity release mortgage?
Although most equity release products will not allow you to rent the house out, there are some that are designed for buy to let. Your mortgage adviser will be able to explain the different later life products to you when you discuss your intentions.
Do I need a solicitor for equity release?
It is advisable to use a solicitor when applying for equity release, as most later life lenders will require that the law firm has at least three or four lawyers/partners. This means that your regular local solicitor may not be acceptable. The solicitor will also need to be on the lender’s panel in order to act.
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Why release equity in Sutton?
If you’re a homeowner in Sutton looking for ways to boost your retirement income, you could consider releasing equity from your home by way of a lifetime mortgage. This could provide the extra financial assistance you need to make ends meet, without having to sell your house.
Sutton has been described as a lovely town to live. Sutton is a town located in the south west region of London. It is within the London borough of Sutton and has a population of around 185,000 residents. The town is located near to the capital city of London and is well connected to it by public transport links. It is also a popular place to live and work due to its close proximity to the city.
Sutton has a wide range of amenities and is home to a number of good schools. The town centre is vibrant and has a good selection of shops, restaurants and bars. There are also a number of parks and green spaces in Sutton, which makes it a great place to live.
The transport links in Sutton are excellent, with regular trains to London Victoria, London Bridge and London Waterloo. There are also a number of bus routes that run through the town.
If you are looking for a good place to live in south-west London, then Sutton is definitely worth considering.
Conclusion
Equity release Sutton mortgages may be a good option for you if you’re looking for extra money and you own your home outright or have a small mortgage. If you release equity from your home, you can either take the money as a lump sum or as regular payments. The money is tax-free but may affect your benefits so advice here is needed.
Before taking out equity release, it’s important that you understand how it works and the implications. An independent financial adviser can help you understand equity release and make sure that it’s the right choice for you.
They will look at your financial circumstances and explain the different types of equity release.
If you’re interested in equity release, I NEED ADVICE can put you in touch with a qualified adviser. They will ask about your situation and make sure that you understand the process and the fees involved.
Your home may be repossessed if you don’t keep up repayments on your mortgage.
An equity release product will reduce the value of your estate, it will not be suitable for everyone and may effect your entitlement to state benefits.
To understand the risks please ask your mortgage advisor for a personalised illustration.
To find out up to date information about lenders and mortgage advice in general, contact a qualified mortgage adviser.
The information on this page is not tailored to any individual readers and should not be considered financial advice under any circumstances.
If you are seeking advice about a mortgage, you should consult a qualified professional.
