If you’re aged 55 or over and want to access the cash tied up in your home, equity release could be the right option for you. This will normally be provided as a tax-free lump sum and will allow you to live more comfortably.
In the meantime, you can still live in your home until you move into residential care or pass away, potentially benefiting from any rise in property value that might occur during that time. There are two types of equity release – whilst a lifetime mortgage is the most popular, home reversion is sometimes a viable option too.
Providing that the property is your main residence, you can take out a lifetime mortgage and retain ownership. Usually people who take out a lifetime mortgage choose to not make repayments, leaving it to be repaid when they die or move into residential care. At this point, the full loan amount and any accrued interest is due for repayment. However, many options offer the opportunity to pay all or some of the interest before this happens, and sometimes you can make repayments on both the interest and the capital.
Lifetime mortgages come with a no negative equity guarantee, which means that following the eventual sale of the property and the paying of fees to the estate agent and solicitor, if the remaining amount doesn’t cover the outstanding loan, neither the individual nor their estate are liable to pay the remaining sum.
As with regular mortgages, lifetime mortgages come in different shapes and sizes, which is why the advice and guidance of an experienced financial adviser is crucial.
This approach is quite different, as it involves selling some or all of your property to a home reversion provider. However, some aspects are similar to a lifetime mortgage, in that you need to be a certain age (usually 60 or 65) and can take the equity as either a lump sum or regular payments, which will total anywhere between 10% and 60% of the market value of your home – the older you are, the higher this will be.
In addition, you can choose to remain in the property until you move into long-term care or pass away, or you can move to another property providing that it’s permitted by the home reversion provider. This option also comes with a no negative equity guarantee.
Essentially, you can continue to live in your home for as long as you wish, the difference being that it will be owned by someone else and you will live there rent-free with no interest to pay. However, if your property increases in value, you will only benefit from the share that you still own.
Things to bear in mind
An Equity release product will reduce the value of your estate, will not be suitable for everyone and may affect your entitlement to state benefits. To understand the features and risks, please ask for a personalised illustration.
Discussing your options with Hammond Financial will enable you to make an informed decision. Where possible, we make sure to include family members in the conversation.
A fee of £995 may be charged.
A sample of our providers
Hammond Financial is an appointed representative of PRIMIS Mortgage Network. PRIMIS Mortgage Network is a trading style of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Our initial mortgage consultation is free. Hammond Financial usually charges a fee for mortgage advice. The amount we will charge is dependent on the amount of research and administration required. We will discuss and agree this with you at the earliest opportunity.
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