Equity release through a lifetime mortgage could be more flexible than you think
New mortgage rules are making it more and more difficult for anyone nearing or in retirement to get a new mortgage. Minimum income requirements and credit checks may make it impossible for you to get a standard mortgage even though you may still be working or have a guaranteed income from a pension.
Releasing equity from your home may therefore be a viable solution and one that you may not have considered. The 2 main requirements to be eligible to release equity from your property are that you are over 55 years of age, or the youngest applicant is over 55 and are a homeowner. if you meet these requirements why not try the calculator on the right to find out how much you can release.
No credit checks or income checks
There are two different types of Equity Release products on the market, Lifetime Mortgages and Home Reversion Plans.
There are no credit checks, no minimum income requirements and if you don’t want to you don’t have to make any monthly repayments with a Lifetime Mortgage, which could free up some spare cash for you.
With a Home Reversion plan you sell part or all of your property for a tax free cash lump sum. The amount you will receive will be much lower than the market value of your home but you will be able to live in your home for the rest of your life completely rent free.
A Lifetime Mortgage is a mortgage with no end date. Interest is charged on the loan, most commonly at a fixed rate for life, and is added to the loan each month. This does increase the loan amount quite quickly but the loan does not have to be repaid until you die or move in to long term care.
Make payments to reduce the interest
If you are concerned about the amount of interest accruing on the loan you can with most plans make ‘voluntary’ overpayments of up to 15% of the initial loan amount each year without penalty or further costs. These payments are completely voluntary and are not fixed and you can make as many or as few payments as you like from £25 per payment.
Example of how making overpayments can reduce the interest or even repay the loan in full.
Loan amount: £100,000 with an interest rate of 4.8% fixed for the life of the loan.
The monthly interest accruing is £400. After 15 years with no payments being made the loan will increase to £202,032.
Making payments at the equivalent of £417 per month, or 5% of the initial loan, after 15 years the loan will have decreased to £95,749.
Making payments at the equivalent of £833 per month, or 10% of the initial loan amount, after 13 years the loan will be repaid in full.
Making payments at the equivalent of £1,250 per month, or 15% of the initial loan amount, after 8 years the loan will be repaid in full.
A Lifetime Mortgage may therefore be a simpler and cost effective way of either remortgaging or simply getting a new mortgage for anyone approaching or already in retirement. If you have a current mortgage on your home, this will need to be repaid when you apply for a Lifetime Mortgage, although you can use the money you release to repay the loan. You must therefore take this into consideration when calculating the amount you can release as you may end up with less cash than you expected.
The Your Time Guarantee:
- Fixed fees of £695 – not a percentage of the amount you release.
- No call centres or sales calls.
- No Completion-No Fee Guaranteed.
- Full independent advice service.
Find out how much you could potentially release from the equity in your home with our simple, free and instant Equity Release Calculator.