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What is Equity Release?

Equity Release is a way for homeowners over the age of 55 to access part of the value of their home without having to sell and move.

The version most often recommended as suitable is called a Lifetime Mortgage and this is described below, there is also the Home Reversion plan – see description below.

Available as a single lump sum, multiple ad-hoc amounts taken as and when you choose, or even as a fixed monthly income the money is tax-free on release, and you retain full ownership of your home*

The amount you may be eligible for is calculated by using your date of birth and the value of your home, or the one you wish to purchase. The loan is secured against your property and is usually repaid when the last surviving borrower either enters long-term care or passes away. At this point, the property would be sold and the loan plus accumulated interest paid back to the provider-with any remaining funds available to the borrowers’ beneficiaries. You do have the option to repay the loan in part or full at any point, which may be subject to charges.

You can choose to pay towards the loan to cap or even reduce the debt, but if you choose not to, then the balance will increase over time as interest is added on a compounding basis. The equity in your home may be eroded by the effect of compounding interest.

Some lenders will “increase the release” for borrowers with certain health concerns- a simple questionnaire can help us to establish if this is available to you.

The No Negative Equity Guarantee built in to every arrangement that we would consider recommending means that the amount to be repaid to the lender can never be more than the eventual sale price of the property.

Interest rates can be fixed for the life of the loan, so from the outset you will know exactly what the balance of the loan will be in the future- and you even have the option to ring-fence part of the eventual net sale proceeds of the property to ensure an amount is left for your beneficiaries to inherit. Using this facility may reduce the sum available at the outset.

Equity Release plans can be taken from one property to another if you move home, subject to meeting lender criteria and terms & conditions.

Eligibility for Means Tested Benefits can be affected by using Equity Release, and part of our service is to establish if anything you may be receiving (or might be eligible for, but not currently receiving) might be affected by using Equity Release.

Before the release of funds, you will need to see a Solicitor suitably experienced and qualified to deal with Equity Release. They will charge for their service.

Why do people use Equity Release?

The money can be used for any legal purpose, among the most common uses are:

  • Repaying existing debt, including mortgages
  • Lifestyle-home improvements, holidays, new cars
  • Helping family-gifting money to family to help buy a property
  • Topping up income

We’ve helped clients to “re-mortgage” their existing Equity Release plans to make use of a better arrangement with a new lender- if there are expensive early repayment charges applicable to the existing arrangement, this may not be advisable. Some lifetime mortgages started years ago may be out of penalty period, but on very high-interest rates compared to modern arrangements.

If you would like us to take a look at an existing plan you have, please contact our advisor, Mike Hodgetts. click below to contact Mike. Or call 01473 730999

*with a Lifetime Mortgage a mortgage is secured against your home, Home Reversion involves selling part or all of your home to a reversion provider.

Home Reversion

In contrast to a Lifetime Mortgage, Home Reversion allows owner-occupiers over the age of 60 to sell part or all of their home to a provider in return for a cash lump sum. The owner is permitted to remain in that home for life, subject to a lifetime tenancy. No repayments are necessary. 

“Equity Release may involve a lifetime mortgage or home reversion plan. To understand the features and risks of an Equity Release scheme, please ask for a personalised illustration. Equity Release may not be right for everyone. It may affect your entitlement to state benefits and will reduce the value of your estate. Check that this mortgage will meet your needs if you want to move or sell your home or want your family to inherit it”.

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Lighthouse Platinum Wealth Management

4 Constable Court
The Street
Ipswich IP8 3LY
Tel. 01473 730999

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