Later life mortgages are for those usually aged over 55, who are looking to release some equity in their home.
There are two equity release options:
With a Lifetime Mortgage you take out a mortgage secured on your property provided it is your main residence, while retaining ownership. You can choose to ring-fence some of the value of your property as an inheritance for your family. You can choose to make repayments or let the interest roll-up. The loan amount and any accrued interest is paid back when you die or when you move into long-term care.
With Home Reversion you sell part or all of your home to a home reversion provider in return for a lump sum or regular payments. You have the right to continue living in the property until you die, rent free, but you have to agree to maintain and insure it. You can ring-fence a percentage of your property for later use, possibly for inheritance. The percentage you retain will always remain the same regardless of the change in property values, unless you decide to take further cash releases. At the end of the plan your property is sold and the sale proceeds are shared according to the remaining proportions of ownership.
Equity Release Myths!
At CFS we’re dedicated to providing you with clear, simple advice that is suitable for you and your particular circumstances. Unfortunately there are plenty of horror stories and misinformation surrounding equity release!
We see and hear so many of these myths that we’d like to take this opportunity to put your mind at rest!
Here are the top 10 myths about equity release you may have heard followed by the facts. If you have any questions at all about equity release or later life lending after reading these please do get in touch with our qualified advisors.
Myth 1: You will lose ownership and control of your property
With a lifetime mortgage you will be the owner of your home for as long as you want to live in it. This is in the same way as you would for a regular mortgage and as with any mortgage providing you meet the condition of the lifetime mortgage.
Myth 2: You will owe more than the value of your home
As part of the Equity Release Council statement of principles, all lenders must now feature a “No Negative Equity Guarantee”. This means you will never owe more than what your home is worth once sold, even if it is sold for less than the amount owed.
Myth 3: It’s not possible to reduce the outstanding debt
There are products that offer you the option to make partial repayments with no early repayment charges. There are also products that allow you the option to pay monthly interest so the debt will not increase as much as it would if you let the interest roll up.
Myth 4: You will have to stay in the same property for all your life
With most lifetime mortgages you can move home and transfer your lifetime mortgage to a new property. You can also use a lifetime mortgage to move home, a lifetime mortgage can be used on a purchase in the same way as a regular mortgage.
Myth 5: You will leave debt to your family and loved ones
Providing the terms and conditions are met, no debt is left to your estate and you will never owe more than the value of your home once sold.
Myth 6: You will not be able to leave your property as an inheritance
A lifetime mortgage is designed to be repaid by selling the property after you move into permanent long-term care or you die. Once the loan has been repaid, any money left over can go to your beneficiaries.
Myth 7: Equity can’t be released if there is an outstanding mortgage
You can apply for a lifetime mortgage providing you pay off your existing mortgage balance.
Myth 8: Equity release or later life lending is unsafe and unregulated
Lifetime mortgages are regulated by the Financial Conduct Authority (FCA).
Myth 9: Equity release interest rates are high and variable
The interest rate can be fixed for the lifetime of the mortgage and is determined by the size of the loan against the value of you home (LTV).
Myth 10: You can only take one amount out once
You can take out equity release to boost your monthly income. You can take out an initial amount to buy a car or help a loved one with their first home deposit and reserve an amount for later drawdown for a dream holiday.