Equity release mortgages allow clients over the age of 55 to withdraw some of the value they have tied up in their property. This money can be released now to improve the quality of their lives.
An equity release mortgage is probably the most common way of doing this. It involves raising a mortgage on your property. On completion you receive the cash raised by cheque or paid into your bank account. As equity release mortgages involve borrowing money, interest is charged on the loan. Most equity release mortgages do not require you to make monthly payments. The interest is added to the loan. This means the size of the equity release mortgage increases over time. However, it gives clients the freedom to use the money now to improve the quality of their lives.
Clients can use the money from an equity release mortgage for virtually any legal purpose. We have seen clients use the money to
Pay off mortgages, loans or credit cards
Pay for home impotents
Make essential repairs to their homes
Pay for luxuries such as a holiday of a lifetime or a new car
Any client interested in this would need careful advice but speaking generally, all clients need to be over the age of 55, own their own home, have a reasonable credit score and not rent the house to someone else. Different equity release companies have different requirements but the above are pretty much common to all
For those clients who do not want an equity release mortgage for whatever reason a home reversion scheme is an alternative. This involves selling your property to a home reversion company. The company gives a cash lump sum and allows you to live in it for the rest of your life. The amount they give however, is less than the full market value.
Selling your home and moving to a smaller property is another alternative.
There are and some of the disadvantages are listed below. This is only meant to be a guide, however, and is not exhaustive
As interest is added to the loan the amount outstanding can rise significantly. This can reduce the amount you eventually leave for your children or family.
The amounts raised can affect your entitlement to state benefits and your tax situation.
Equity release mortgages, their advantages and disadvantages need careful consideration. We strongly advise you take impartial advice for a suitably qualified adviser.
"Equity release" includes home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration
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