What is equity release?

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.

Equity Release will reduce the value of your estate and can affect your eligibility for means tested benefits.

The total amount you are able to release from your property will depend upon its value and any outstanding mortgage you have. So, 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.

The equity in your home is the value of your property less the outstanding mortgage. An equity release broker works alongside you to review your circumstances and process the application quickly and smoothly, which is where our specialist mortgage advisors Northampton excel.

How does equity release work?

You have to be at least 55 years old to qualify for equity release. There are two main equity release options available, including a lifetime mortgage and a home reversion plan.

For 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 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.

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Frequently Asked Questions

How long does the process take?

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.

Are the interest rates fixed or variable?

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.

How does equity release compare to an ordinary mortgage?

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.

What happens if I don’t pay back the loan in my lifetime? What happens if I end up owing more than the home is worth?

Many people considering equity release 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 no-negative-equity. This means that when your property is sold, and agents’ and solicitors’ fees have been paid, neither you, your estate, or 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.

Can I move to another property?

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.

Is there a minimum amount of equity I can withdraw?

You will need to check with your equity provider if there is a minimum amount you can withdraw at a time.

Will equity release affect my Income Tax position or eligibility for benefits?

Equity release can affect your tax position and eligibility for welfare benefits. It’s important to read the terms and conditions of your product and consult an equity release broker to see how this could affect you.

Are there any hidden costs?

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.