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Understanding Equity Release
Equity release means unlocking the capital from your home, either as an income or a lump sum, via a mortgage product.
The term equity means the amount in money of your home that you own. For example, if your property is valued at £300,000, and you have a £50,000 mortgage left, then you have £250,000 of equity.
The equity released from your home can then be used to help supplement your income in retirement or for a large purchase.
Equity Release
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Examples of how equity release can be used are:
- Supplementing retirement income.
- Home improvements or alterations.
- Paying for care.
- Gifting to family.
- A large purchase such as a motor home, caravan, or boat.
- Paying off a current mortgage that’s term is ending soon.
- Repaying debts.
There are lots of ways to release equity from your home, equity release is not the only option.
Your options for equity release include:
- Regular repayment mortgage.
- Interest-only mortgage.
- Retirement interest-only mortgage (RIO).
- Lifetime mortgage often called equity release.
- Home reversion plan.
The option that would be best for you would depend on your income, both current income and future pension income, your age, how much equity you have in your home, whether it’s a sole or joint application, and credit history.
The tax-free cash that you are releasing from your home can be taken both as a lump sum or in smaller chunks, often called drawdown equity release, depending on your objectives with the money.
The options that would be best for your situation will depend on what you are looking to do with the money, your income, and whether you receive any means tested benefits that would be affected by a lump sum.
An equity release mortgage product is not suitable for everyone therefore it is important to speak to an independent mortgage broker. We recommend the best product for your personal situation. It’s important to consider all lending products as alternatives to equity release with your advisor.
Nowadays there are lots of interest saving options including the ability to pay a monthly payment and overpayments to consider. Also, if you do not require a lump sum of cash a drawdown equity release mortgage can save you a lot of money in interest as it’ll only start accruing as and when you take the cash.
A drawdown equity release mortgage works like an overdraft facility, you’re approved for the full amount as part of the initial application and then you can decide as and when you would like the cash.
An equity release mortgage product is not suitable for everyone, all other lending products should be considered and discounted beforehand. Most later life lending or age 50+ mortgage options fit with high street mortgage lenders.
You can schedule a call online or give us a call today and we’ll answer all your questions surrounding equity release and help you decide which product is right for you.
