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Equity Release

An equity release mortgage may be a good option for those aged 55 or over who may want to free up money. But it’s important to know the ins and outs of this product.

Deciding whether to remortgage for equity release can be a consideration for property owners looking to raise financial collateral. Though you may be able to release up to 60% of your property’s value, it’s worth bearing in mind that this may change your financial situation quite drastically.
  • You must be a homeowner aged 55 or over to draw an equity release.

  • The amount that you can borrow is normally restricted to a maximum of 60%, depending on the borrower’s age and property value.

  • Equity release plans are available as a lifetime mortgage or a home reversion plan.

  • Any outstanding debt owed would be repaid on the sale of your home.

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Am I eligible for an equity release mortgage?

If you are a homeowner aged over 55, you can apply for an equity release mortgage. However, borrowers should be aware of the requirements you’ll need to fulfil.

Your eligibility depends on several factors, including the value of your property, the amount of equity you hold and your current financial situation.

You can release equity in one lump sum or agree to payment of several smaller amounts if you’d prefer to receive instalments over time. However, you will pay interest on each of the smaller sums.

Before releasing equity from your home, it is important to receive professional advice from a financial advisor.

Types of home equity release

Lump sum

Releasing equity as a lump sum is a form of lifetime mortgage agreement. You’ll receive your finances in one go. However, this arrangement features a compound interest rate. This means the outstanding balance may grow larger than other kinds of loan.

Some borrowers may choose a lump sum equity release, as payments don’t need to be made until the house is sold on.

Drawdown

Aside from an initial lump sum, the rest of the equity you release is held in reserve, ready for you to ‘draw down’ from. This way, you can borrow smaller amounts as and when you want them, with interest paid on each drawdown rather than being charged to the overall amount of equity. This way, you can manage the interest you pay and the amount you owe more effectively.

Home reversion plan

A home reversion equity release plan allows the borrower to sell either the entirety or a portion of their property at a below market value. Home reversion plans only apply to those over the age of 65. Borrowers can either receive the funds in a lump sum or through regular payments. After sale, borrowers can then live in the house rent-free. At the end of the plan your property is sold and the sale proceeds are shared according to the remaining proportions of ownership. 

Pros and cons of home equity release

As with all loans, there are pros and cons to home equity release. For many it can be an effective way to borrow, but it’s not always the best option for others. There’s a lot to consider, so make sure you know every element of the borrowing scheme before finalising your decision.

Pros of equity release

While it’s important to be aware of the potential risks, there are some benefits to equity release. 

Cons of equity release

As with any financial decision, it’s important to be aware of the disadvantages before making any commitments.

Commonly asked questions about equity release

Releasing equity from your home is an important financial decision, so it’s important to be aware of every contributing factor. Here are some of the most common queries around equity release.

How much can I borrow?

The amount you can borrow varies depending on your provider and circumstances. Some lenders allow a borrower to release up to 60% of their property value.

How long are the repayment terms?

Your repayment terms will depend on the type of deal you agree. Though most don’t feature a monthly repayment plan, some drawdown mortgages allow you to cover the cost of the interest if you wish.

Do I need a valuation?

Yes, you will need to have your property valued during the application process.

Are there any loan fees?

Lenders may charge fees for the application process to cover the costs of setting up the application and legal requirements. Our commission comes from the lender once your equity release loan is drawn down.

Applying for home equity release

When it comes to drawing an equity release mortgage there’s a lot of financial aspects to consider. We want customers to find it as easy as possible to find out what they need to know.

Once you have decided how much you want to borrow you can use our online application to apply. We can then put you in touch with one of our specialist providers, who will work with you to decide whether an equity release scheme meets your needs and circumstances.

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