Why consider an equity release mortgage?
The average person can expect to live for around 20 years following retirement and for many people equity release is an attractive option as it offers either a lump sum or a regular income which could be used in a number of ways:
- To supplement your pension
- To pass on money to your family while you are still alive
- To go on a once-in-a-lifetime holiday or trip
- To redecorate or renovate your home
- To pay off a loan, clear a mortgage or pay off a residential mortgage
How does an equity release mortgage differ from a traditional mortgage?
- There is no income assessment/affordability check
- They offer either a lump sum or a regular income, usually with no regular repayments being required
- The loan is due to be repaid (together with all interest and charges which may have accrued) either following the death of the borrower (or the second borrower if there is more than one borrower) or following a necessary move into sheltered accommodation or long term care
- With repayment mortgages the amount you owe to the bank reduces over time but the amount of money due to be repaid under an equity release product increases every year so the longer the bank have to wait for their money the more money they are entitled to receive in the end
For example, based on a loan amount of £25,000
|Repayment at end of year||Repayment amount|
What conditions are attached to an equity release mortgage?
Until a borrower either dies or moves into sheltered accommodation or long term care he or she is entitled to continue to live in the property but, as with all mortgage products, there are certain conditions that a borrower would be expected to comply with.
- You will not permitted to have another mortgage from anyone else
- You will have to insure the property
- You have to keep the property in good repair
What are the disadvantages of an equity release mortgage?
The money received from the mortgage may affect your eligibility for certain welfare benefits and your tax position. It will also reduce the inheritance that you will be able to leave for family and/or friends.
If you would like further information please contact a member of our team.