How does Equity Release work?
If you are over 55 and you own your own home, a Lifetime mortgage could provide the missing piece of the puzzle when it comes to boosting your retirement plan.
The amount of equity you can release from your property won’t depend on how well you meet a lender’s affordability criteria, like it does with standard mortgages. It will be based on your age, your health, and your property’s value.
You can release equity from your property to use as you wish. You can pay the interest as you go, or you can roll the interest up, if you are in a financial position to do so.
The mortgage will be paid back to the lender when you go into long term care or pass away.
What if I end up owing more than my property is worth?
All providers that are part of the Equity Release Council offer a no negative equity guarantee. This means that, however long interest is allowed to roll up for, if the amount owed does exceed the property value, the whole amount is swallowed up when you go into long term care or pass away. Your estate will NEVER owe more than the property is worth once sold.
What if one borrower passes before the other? Does the surviving borrower become homeless?
If one borrower needs to go into long term care, or dies, nothing changes for the surviving borrower.
They can continue to stay in their home. When their time comes, the property will need to be sold to pay back the lender.
When I die, will I be leaving debt to my family?
In short, no! When you die, your equity release plan is repaid. Your beneficiaries must inform your equity release lender. Typically, you will have 12 months after your death in which to repay your plan. Usually, your property would be sold to pay this, unless a member of the family wanted to keep the property and repay the lifetime mortgage by raising the funds themselves.
What if I want to pay the lender back early?
This is an option. However, you will have an early repayment charge to pay, which tends to be a percentage of the outstanding amount. This would be
outlined in your initial offer; your lender will have confirmed how long you are tied in for and how much you owe should you leave at a certain time.
What if I decide I want to move?
Most lenders will allow you to port your current plan over to a new property, as long as the new property is suitable.