What’s the difference between a lifetime mortgage and an equity release?
Equity release is a type of loan for people 55 and older that lets you get access to the equity you have in your home.
One of the two main ways to get money from your home’s equity is through a home reversion plan or a lifetime mortgage.
Most lenders no longer offer home reversion plans, so lifetime mortgages now make up most of the equity release market.
How much money could I release with a lifetime mortgage?
This will depend on how old you are, how much your home is worth, and whether or not you still owe money on your mortgage. Most people will give up between 20% and 50% of their home’s equity. Considering how much home prices have gone up over time, this could be a large amount. For example, if your house is worth £300,000 and your mortgage is for £50,000, you will have £250,000 in equity. This means that, depending on your age, you could get up to £137,500.
Most equity release loans start at around £10,000, and the average loan size is around £95,000.
How long does equity release take to arrange?
It usually takes between 4 and 6 weeks from the time you apply until you get your money.
And what about my spouse – can we take out a joint equity release?
You can apply for a joint equity release if you and your partner are both over 55 and married, in a civil partnership, or in a long-term relationship where you live together. So, if one of you needs care for a long time or dies, the other can stay in the house. If only one of you applies for equity release and then dies or needs care, the other person would have to pay back the loan or sell the house.
Will equity release put my house at risk?
You can apply for a joint equity release if you and your partner are both over 55 and married, in a civil partnership, or in a long-term relationship where you live together. So, if one of you needs care for a long time or dies, the other can stay in your Essex home. If only one of you applies for equity release and then dies or needs care, the other person would have to pay back the loan or sell the house.
How will a lifetime mortgage affect any money I leave to my family as an inheritance?
If you opt to roll up the interest on a lifetime mortgage, the lender will add these costs to the original loan, which you will have to pay back when you die or go into long-term care. This will lower the value of your estate. This means that there will be less money for your family to inherit, so you should make sure you are okay with this before getting a lifetime mortgage.
Can I get an equity release if I still owe money on my mortgage?
Even if you have a mortgage, you can still get an equity release plan, but you will have to pay off the mortgage with the money you get from the plan or with other money.
What does it mean to have “no negative equity”?
This means that you will never owe more than your property is worth, even if the value of your property goes down. If there isn’t enough money from the sale of your property to pay back the loan and interest, the lender will write this off.
What’s the typical interest rate for equity release?
For the lowest loan-to-value plans, interest rates can start as low as 2.41% AER and go up to 6.47% AER for the highest loan-to-value plans.
Most lifetime mortgages cost between 3% AER and 4.5% AER on average.
When I get a lifetime mortgage, do I need to tell my family?
You are not required by law to tell your family or beneficiaries that you are getting equity release, but it is strongly suggested that you do.
Equity release could have a big effect on how you plan to be cared for or how well you live in your later years, so it’s best to tell people about it. A lifetime mortgage may also affect the inheritance you leave to your family, which is something you may want to talk to them about.
When you talk to your family, they might also think of other ways they can help you.
Do you have to make monthly repayments on a lifetime mortgage?
No, you do not have to pay back a lifetime mortgage every month. Since equity release can be used to pay off a mortgage, it could be a way for older people to lower their monthly bills.
Can I make monthly repayments on a lifetime mortgage?
You can get an interest-only lifetime mortgage if you want to make monthly payments to reduce the effect of compound interest. This means that you will pay off the interest each month, and the only thing left to pay off at the end of the term is the initial capital.
Can I pay off my lifetime mortgage early?
Lifetime mortgages are usually paid off when you move into a permanent care facility or die, which is why they are called “lifetime mortgages.” But you can pay off the loan early if you have the money to do so.
Keep in mind, though, that depending on how far into the loan term you are, you may have to pay an early repayment fee. This is usually set at a certain percentage of the balance. Before you take out the loan, you will be told all the details.
What will happen to my lifetime mortgage when I die?
When you or both you and your partner move into a permanent nursing facility or die, your property is usually sold to pay off the loan facility. Any money left over from the sale will go to your estate and be given out according to your Will.
Do you cover the whole of Essex?
Yes we are based in Essex and cover the whole county and surrounding areas.
For more information on Lifetime Mortgages in Essex please give us a call on 01277 620083.