Tag Archives: Equity Release Loans

Can anyone else live in the property if I take out Equity Release?

Equity release schemes are essentially loans that one can take out against the value of their property. This loan plus the interest that has accrued on it over the years is repaid once the owner has died or moved into long term care, and the house is sold at market value. In a time when living costs are on the rise, home owners are turning towards equity release as an option for financial planning during retirement.

There are two main types of equity release plans, the lifetime mortgage plan and the home reversion plan. Lifetime mortgage is exactly that – it is a loan that is designed to last the entire life of the applicant, and is repaid along with the interest when the house is sold. The applicant legally owns the house and can live in it as long as they live or move into long term care. In case of joint applicants, the house cannot be sold until both the applicants have died or moved into care.

In home reversion plans, a part of the house is sold to the lender. Once the house is sold, proportional share of the sale value of the house is repaid to the provider. Home reversion is not a loan against the house, but a notional selling of part of the house. Both equity release plans accrue compound interest on the loans.

One of the main advantages of an equity release scheme is that you can continue to live in your own home. Of course, that it generates an additional income is also an important advantage, but this could also be achieved by downsizing. Applicants can live in their home for as long as they live. Many people also use equity release loans to pay for home care, so that they can go on living in their own home.

Once the applicants have moved out or died, the equity release scheme ends and the house must be sold. The applicant’s family cannot continue to live in the house after this, unless the full amount of the loan plus interest can be repaid immediately by some other means. In case of home reversion plans, the loan amount increases in proportion to the market value of the house when it is sold.

Sometimes it may be necessary to add another applicant to an existing equity release plan. In cases where joint applicants get divorced, it may also be necessary to remove an applicant from a plan. It is possible to do this, in theory, but is subject to the lender’s terms and conditions for that particular loan. It is therefore important to seek specialist advice and guidance before taking any step related to equity release.

Are Equity Release Schemes available on a buy-to-let, 2nd home or holiday home basis?

Equity release is a popular way of raising money on your property without having to sell the house. There are different types of equity release mortgages, but essentially it is a loan taken against the value of the home, and is repaid when the house is sold, after the owner has died or moved into care. If you have more than one property, it may be possible to release equity on the second home as well. Buy to let equity release is now available from certain equity release lenders.

Some lenders offer equity release loans on multiple holiday homes as well as buy to let homes. Loans are usually offered only if the landlord or the landlords’ family does not rent or live in the property. Buy to let equity release rates are different from home equity release interest rates so it’s worth using an equity release calculator specially designed for buy to let equity release.

Of course, most lenders do not lend if there is an existing large mortgage on the property. The mortgage, if any, must be smaller than the equity that can be released on the property. The amount of equity that can be released on a holiday home depends on several factors, including the age of the applicant. Buy to let equity release is generally only offered if the youngest applicant is over 55 years of age. Landlords with up to 5 buy to let properties can potentially release a proportion of the equity on each property.

The amount of the loan generally varies with age. The more the age of the applicant or the age of the youngest applicant in case of joint applications, the more the proportion of equity that can be borrowed. Also, loans are generally offered in lump sums as opposed to monthly borrowing. Buy to let equity release schemes are becoming increasingly popular, especially among landlords with an extensive property portfolio, as it opens up many possibilities for them in terms of financial planning and further investment.

As with any equity release mortgages, buy to let equity release mortgages involve some setting up costs. These include professional valuation fees which are usually in proportion to the value of the property, application fees, and solicitors’ fees. In addition, if you go to an independent financial adviser, setting up costs also include any fees charged by the adviser.

Individual buy to let equity release schemes may also have additional costs such as early repayment charges. These vary with each policy and as with any financial loan, it is important to find out about all the associated costs before entering into any legally binding contract.

Should I tell my children about Equity Release?

One of the reasons for the increasing popularity of equity release mortgages is the rising cost of living and the inadequacy of pensions as the only source of income during retirement. Equity release mortgages are increasingly being considered as an option for financial planning during retirement by homeowners who are sitting on valuable property but need additional cash flow.

As the demand for equity release loans has increased, companies have begun diversifying the type of equity release plans on offer. Equity release mortgages available today are much more flexible compared to their counterparts a few years ago. Interest rates are also generally lower than a few years back. As such, now may be a good time to explore the market and compare equity release options available, for those who are interested in this option, as well as those who already have an equity release mortgage.

As with any financial loan, there is both an upside as well as a downside to equity release mortgages. By taking a loan against the property, the equity in the property is effectively decreased. This has repercussions for the inheritance that you leave behind for your family. There is also the chance of negative equity, where the amount you owe exceeds the value of the home, although most lenders nowadays cancel out any negative equity owed.

Equity release does provide a good way to raise additional money during retirement, whether it is for a one off expense such as a holiday, a car or home refurbishment, or a regular supplementary income. However, an equity release mortgage potentially affects not just the claimant but the entire family. It is therefore important to take the family into your confidence before opting for such a big step.

You can read up information on equity release online, as well as compare equity release mortgages, but the best thing to do if you’re considering releasing the equity on your home is to talk to an independent financial adviser. This will enable you to get objective and impartial advice on equity release, and whether it is suitable for you. Depending on how much additional income you require, whether or not you want to leave an inheritance, and other factors, the adviser can also guide you about which equity release loan works best for you.

Financial issues are a common reason for family feuds. Things like inheritance are a sensitive matter and before taking any final step relating to your property, it is advisable to understand the consequences thoroughly. There may be other alternatives to raise money, and downsizing is always an option. Equity release mortgages may not be the right choice for some, and may be the perfect choice for others. But once it is opted for, it is difficult to opt out of equity release loans, so take your time to understand exactly what it entails.

What happens to my equity release if I want to move house?

As property prices have soared in the past two decades, home owners have seen an unprecedented rise in the value of their homes. As the cost of living increases, it is not at all surprising that the concept of releasing equity from your home to supplement your income during retirement has caught on furiously. Home equity release is essentially a loan that you can take against the value of your home, while continuing to stay in your property. This loan is recovered after the property is sold.

Home equity release plans are designed for older people, especially pensioners, who own a home but do not have sufficient cash flow to maintain a comfortable lifestyle or perhaps require additional money for a particular goal. The loan can be secured as a lump sum or more commonly in monthly installments. Home equity release is available in two main types of loans, home reversion plans, and lifetime mortgages.

There are no shortage of equity release schemes available on the market. There are many different companies offering different types of equity release loans, all promising to provide the optimum solution between keeping your property and increasing your income. As equity release becomes more and more popular, more flexible products are introduced to meet this growing demand.

One of the most common questions asked when it comes to home equity release is whether you can continue to live in the house for as long as you wish. The answer is yes, as most equity release loans are recovered only after the house can be sold. This can only be done after the owner has died or moved into long term care. However, it is absolutely necessary to understand all the terms and conditions of the equity release mortgage before going ahead with it.

While equity release mortgages work beautifully for thousands of pensioners who require an additional income, it also has its own drawbacks which could make it a wrong option for some. Once you have taken a home equity release loan, it is very difficult to back out due to the complicated terms of the contract. It is therefore vital to seek independent financial advice before signing an equity release loan contract.

You can get equity release explained by the financial expert who can guide you on which type of mortgage will suit you best. Independent advisers can give objective and fair advice on the pros and cons of different home equity release schemes for your particular circumstances. A lot of information is also available on financial resources on the internet, as well as on comparison sites which allow you to compare equity release plans.