What is equity release?
Equity Release, Lifetime Mortgages and Home Reversion Plan will reduce the value of your estate and can affect your eligibility for means tested benefits.
Equity release enables you to unlock the current value of your property in the form of a cash lump sum. It’s designed to offer property owners some financial freedom later in life.
The equity in your home is the value of your property less the outstanding mortgage. The total amount you are able to release from your property will depend upon its value and any outstanding mortgage you have.
For example, if your outstanding mortgage is at £50,000 and your property is worth £250,000, then your total equity would be £200,000.
An equity release broker works alongside you to review your circumstances and process the application quickly and smoothly, which is where our specialist Northampton-based mortgage advisors excel.
Interested in learning more about equity release and whether or not it’s right for you? Complete our contact form below to schedule your free initial consultation today with our expert equity release brokers in Northampton.
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How does equity release work?
You have to be at least 55 years old to qualify for equity release. There are two main options available: a lifetime mortgage and a home reversion plan.
With both plans, you can choose to withdraw the money as a lump sum or in smaller amounts. You only have to pay interest on the amount you have borrowed. You can also choose to ring-fence some of the value of your property for inheritance.
You can remain in your property as long as it is your main residence and you follow the terms and conditions of your contract.
Just like with mortgages, you will need to do your research and get equity release advice from an equity release broker to see whether it’s the right option for you, and if it is, which product will best suit your needs.
How does a Lifetime Mortgage work?
A lifetime mortgage allows you to take out a loan secured on your home. This does not need to be repaid until you die or go into long-term care, although you can choose to repay before then.
How does Home Reversion work?
Home reversion allows you to sell part or all of your home to a company in return for a lump sum or regular payments. These payments are usually between 20% - 60% of the market value.
While some or all of the property is no longer owned by you, you can continue living in the property, rent free, until you die. However, you have to agree to maintain and insure it and your property may be inspected from time to time.
When your property is sold, the sale proceeds are shared according to the remaining proportions of ownership.
What can Equity Release be used for?
Think carefully before securing your debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
By freeing up equity from the value of your house, you can access funds to live the retirement you really want. Here, we’ve listed some of the popular ways homeowners use their equity release loan. This is by no means an exhaustive list, but will give you an idea of what you could use the money for.
Pay off an existing mortgage
Enjoy the freedom that comes with paying off an existing mortgage. Perhaps your interest-only mortgage is coming to an end, and you’re looking for ways to repay the outstanding balance? Equity release could be the solution.
Fund home improvements
Maybe you’ve been dreaming of an extension or a new driveway for some time? Equity release can help make that happen. This could include funding eco-improvements such as wall insulation or triple-glazed windows.
Support family & loved ones
Equity release could help you support your grandchildren, children and loved ones through their big life events. You could contribute to their wedding or help them buy their first home. You could also support a loved one by helping to pay off their debts.
Free up cash to live your best life
If you have big plans for your retirement but a limited budget, equity release can be a suitable way to fund your plans, however big or small. Fancy a world cruise? Want to do more now that you’re no longer working? Equity release could make that possible.
Buy a second house
Whether you’re looking to buy a second property as an investment or holiday home, you can use your equity release loan to fund this. However, if you’re taking out a second mortgage, you’ll need to make sure you can afford both loans.
Consolidating debts makes them easier to manage. You can use your tax-free lump sum to pay back a mortgage, freeing up money to repay other debts. Or, depending on the amount you secure in your loan, you could become debt-free.
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Why Work With Our Equity Release Brokers?
At Derngate Wealth Management Northampton, we work with a wide variety of clients to help them decide which mortgage, equity release or insurance plan is right for them. Shopping around yourself can be immensely time consuming, not to mention confusing; with so many options available, how do you know which one to choose?
We can do all that hard work for you, exploring a range of lenders to identify plans that would best meet your needs. Our experienced and highly qualified equity release brokers will be on-hand to answer your questions in a jargon-free and easy to understand manner, helping you get to grips with everything in no time.
And, once we’ve found you an equity release plan you’re happy to go ahead with, we can help you make the application and get it all sent off.
So, if you’re looking for friendly, local equity release brokers in Northampton, that can provide sound advice on all things equity release, you’ve come to the right place. Ready to get started? Simply call us or send us an email today - we’re ready and waiting to help.
We can also discuss other ways you can make the most of your retirement savings, including advising on pension tax relief.
Frequently Asked Questions
The entire process can take between 8-12 weeks, however this can change depending on various factors. Keep this in mind when planning what you’d like to do with the cash.
Interest rates are usually fixed. However, if they are variable then there will be a cap, which remains the same for the loan’s lifetime.
Equity release interest rates are typically higher than an ordinary mortgage, which is something you will need to bear in mind when considering if it’s the right option for you.
Many people considering this will be concerned about what might happen if they don’t pay back the loan in their lifetime. When choosing a lifetime mortgage or home reversion plan, we recommend choosing one that offers a no-negative-equity guarantee. This means that when your property is sold, and agents’ and solicitors’ fees have been paid, neither you, your estate, nor your beneficiaries will be liable to pay any more, even if the amount left is not enough to repay the outstanding loan to your provider.
If you choose an equity release plan that doesn’t offer a no-negative-equity guarantee, then your beneficiaries will be liable to pay any extra costs above the value of your home.
Yes, you can move to another property and take the lifetime mortgage with you. However, your new property will need to be accepted by your provider to check there is continued security for your equity release loan.
You will need to check with your equity provider if there is a minimum amount you can withdraw at a time.
Aside from the interest rates, you will also need to consider a number of other costs associated with equity release. These can include legal and valuation fees, buildings insurance, home maintenance costs, early repayment charges and any advisor fees. If you’re using a home reversion plan, you may also be liable to pay ground rent. You should take these extra costs into account when considering if you can afford equity release.