If you are a UK homeowner aged 55 or over, Warren & Co may be able to help you access money tied up in your home.
You can take the money you release as a lump sum or, in several smaller amounts or as a combination of both.
This is a lifetime mortgage, to understand the features and risks, ask for a personalised illustration.
Most people who take out equity release use a lifetime mortgage. Usually you don’t have to make any repayments while you’re alive, interest ‘rolls up’ (unpaid interest is added to the loan). This means that the debt can increase quite quickly over a period of time.
However, some lifetime mortgages do now offer you the option to pay all or some of the interest, and some let you pay off the interest and capital.
In the same way that ordinary mortgages vary from lender to lender, so do lifetime mortgages. When considering a lifetime mortgage, it’s useful to know:
- The minimum age at which you can take out a lifetime mortgage. Usually it’s 55.
- The maximum percentage you can borrow. You can normally borrow up to 60% of the value of your property. How much can be released is dependent on your age and the value of your property.
- Interest rates must be fixed or, if they are variable, there must be an upper limit which is fixed for the term of the loan.
- You have the right to remain in your property for life or until you need to move into long-term care, provided the property remains your main residence.
- The product has a “no negative equity guarantee”. This means that when your property is sold, even if the amount left is not enough to repay the outstanding loan to your provider, you will not be liable to pay any more.
Things You Need To Know About Equity Release
Equity release may seem like a good option if you want some extra money and don’t want to move house. However, there are important considerations:
- Equity release can be more expensive in comparison to an ordinary mortgage. If you take out a lifetime mortgage you will normally be charged a higher rate of interest than you would on an ordinary mortgage and your debt can grow quickly if the interest is rolled up.
- For lifetime mortgages, there is no fixed “term” or date by which you are expected to repay your loan. The rate of interest of a lifetime mortgage will not change during the life of your contract.
- Home reversion plans will usually not give you anything near to the true market value of your home when compared to selling your property on the open market.
- If you release equity from your home, you may not be able to rely on your property for money you need later in your retirement.
- Although you can move home and take your lifetime mortgage with you, if you decide you want to downsize later on you may not have enough equity in your home to do this. This means you may need to repay some of your mortgage.
- The money you receive from equity release may affect your entitlement to state benefits.
- You will have to pay arrangement fees, which can reach approx. £1,500-£3,000 in total, depending on the plan being arranged.
- If you’ve taken out an interest roll-up plan, there will be less for you to pass onto your family as an inheritance.
- There may be early repayment charges if you change your mind, which could be expensive, although they are not applicable if you die or move into long-term care.